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Item 1. Business

2026-03-26 compared with 2025-03-17 · 1247 added, 969 removed, 20 unchanged (99% of the section changed)

All references in this report to “Dermata,” the “Company,” “we,” “us,” or “our” mean Dermata Therapeutics, Inc.

references in this report to “Dermata,” the “Company,” “we,” “us,” or “our”

mean Dermata Therapeutics, Inc.

unless stated otherwise or the context otherwise indicates.

We are a late-stage medical dermatology company focused on identifying, developing, and commercializing innovative pharmaceutical product candidates for the treatment of medical skin diseases and aesthetic applications we believe represent significant market opportunities.

Dermatological diseases such as acne vulgaris (or acne), psoriasis vulgaris (or psoriasis), hyperhidrosis, and various aesthetic indications, affect millions of people worldwide each year which may negatively impact their quality of life and emotional well-being.

While there are multiple current treatment options for these indications on the market, we believe that most have significant drawbacks, including underwhelming efficacy, cumbersome application regimens and varying negative side effects, all of which we believe lead to decreased patient compliance.

A majority of these indications are first treated with topical therapies, however, many patients frequently switch treatments or discontinue treatment altogether due to patient dissatisfaction.

This is primarily due to slow and modest response rates, early tolerability issues, once or twice daily application schedules and long duration of therapy.

Given the limitations with current topical therapies, we believe there is a significant opportunity to address the needs of frustrated patients searching for topical products that satisfy their dermatological and lifestyle needs.

Our two product candidates, XYNGARI™ (formerly DMT310) and DMT410, both incorporate our proprietary, multifaceted, Spongilla technology to topically treat a variety of dermatological conditions.

Our Spongilla technology is derived from a naturally grown freshwater sponge, Spongilla lacustris or Spongilla , which is processed into a powder that is mixed with a fluidizing agent immediately prior to application to form an easily applicable paste.

Spongilla is a unique freshwater sponge that only grows in commercial quantities in select regions of the world and under specific environmental conditions, all of which give it its distinctive anti-microbial, anti-inflammatory, and mechanical properties.

The combination of these environmental conditions, the proprietary harvesting protocols developed with our exclusive supplier, and our post-harvest processing procedures produce a pharmaceutical product candidate that optimizes the mechanical components as well as the chemical components of the sponge to create a product candidate with multiple mechanisms of action for the treatment of inflammatory skin diseases and aesthetic applications.

We believe our Spongilla technology platform will enable us to develop XYNGARI TM as either a single, stand-alone agent, or used together with other dermatology products to target the topical delivery of chemical compounds into the dermis for a variety of dermatology indications.

We believe the combination of Spongilla’s mechanical and chemical components (which we believe have demonstrated, in-vitro , anti-microbial and anti-inflammatory properties), add to the versatility of our Spongilla technology platform’s effectiveness as a singular product, in the treatment of a wide variety of medical skin diseases like acne and psoriasis.

We also believe the mechanical properties of our Spongilla technology allows for the intradermal delivery of a variety of large molecules, like botulinum toxins, monoclonal antibodies, or dermal fillers, to targeted treatment sites, through topical application without the need for needles.

Our lead product candidate, XYNGARI™, is intended to utilize our Spongilla technology for the once weekly treatment of a variety of skin diseases, with our initial focus being the treatment of acne, which has a U.S.

market size of approximately 30 million patients seeking treatment.

In November 2024, we completed patient enrollment in the first of two planned Phase 3 clinical trials of XYNGARI™ in moderate-to-severe acne.

We expect to receive top-line results from the first Phase 3 trial in March 2025.

Each Phase 3 study will be double-blind, randomized, placebo controlled, and enroll over 500 patients with moderate to severe acne, age 9 years or older across sites in the United States and Latin America.

The primary endpoints include absolute reduction in inflammatory and noninflammatory lesions and the improvement in investigators global assessment (IGA) of acne.

Patients will be treated once a week for 12 weeks with either XYNGARI™ or placebo and will be evaluated monthly.

As requested by the FDA, the second Phase 3 study will be followed by an extension study to follow patients for a 12-month total treatment period.

Previously XYNGARI™ has shown its ability to treat the multiple causes of acne in a Phase 2b study where we initially saw a 45% reduction in inflammatory lesions after four treatments, with XYNGARI™ achieving statistically significant improvements at all time points for all three primary endpoints throughout the study (reduction in inflammatory lesions, reduction in non-inflammatory lesions, and improvement in IGA).

In addition, based on the multiple mechanisms of action and anti-inflammatory effect seen with the XYNGARI™ acne trial, we completed a Phase 1b proof of concept, or POC, trial in psoriasis where we saw encouraging results warranting further investigation upon our receipt of adequate funding.

XYNGARI™ consists of two grams of powder processed from the naturally grown freshwater sponge, Spongilla lacustris.

The patient mixes the powder with a fluidizing agent (3% hydrogen peroxide) immediately prior to application to form an easy-to-apply paste.

The paste is applied like a mud mask and is left on the skin for approximately ten to fifteen minutes, after which time it is washed off with water.

Due to the unique combination of XYNGARI™’s mechanical components and chemical components, and based on our Phase 2 acne data, we believe patients will only need to apply XYNGARI™ once weekly to produce the desired treatment effect.

The mechanical components of the Spongilla powder consist of many microscopic siliceous, needle-like spicules that, when massaged into the skin, penetrate the stratum corneum (the skin’s outermost protective layer) and create microchannels into the dermis where pro-inflammatory cytokines and bacteria reside.

We believe that the penetration of the spicules also leads to the opening of microchannels, which allow oxygen to enter pilosebaceous glands, helping to kill C.

acnes , which grow in an anaerobic (without oxygen) environment ( C.

acnes are the bacteria that cause inflammatory lesions in acne patients).

The spicules also cause turnover of the top layer of dead skin, thereby increasing collagen production resulting in skin rejuvenation.

Additionally, we believe the newly created microchannels provide a conduit for XYNGARI™’s naturally occurring chemical compounds to be delivered to the dermis and pilosebaceous glands, helping to kill the C.

acnes and reduce inflammation .

In addition to anti-microbial compounds, XYNGARI™ also appears to have anti-inflammatory chemical compounds, as demonstrated during in vitro experiments, that inhibit inflammation through the reduction of C.acnes stimulated IL-8 production and by inhibiting IL-17A and IL-17F expression in human cell lines.

Also, during in vitro studies of XYNGARI™’s organic compounds, we observed the inhibition of the lipogenesis of sebocytes, which may translate to a reduction in sebum (an oily and waxy substance produced by the human body’s sebaceous glands) production and the oiliness of the skin in patients, which was observed by a number of clinical investigators in our Phase 2 acne studies.

We believe the combination of these biological and mechanical effects could be important factors in treating multiple inflammatory skin diseases, as seen in our clinical trials.

Our second product candidate utilizing our Spongilla technology is DMT410.

DMT410 is intended to consist of one treatment of our proprietary sponge powder followed by one topical application of botulinum toxin for delivery into the dermis.

Currently, botulinum toxin is only approved to be delivered to the dermis by intradermal injections, which can be painful for the patient and time-consuming for the physician.

However, we believe DMT410’s ability to topically deliver botulinum toxin into the dermis could have similar levels of efficacy to existing delivery techniques, with fewer tolerability issues, and a quicker application time, possibly replacing the need for intradermal injections.

We first tested DMT410 in a Phase 1 POC trial in primary axillary hyperhidrosis patients where we observed 80% of patients achieving a reduction in gravimetric sweat production greater than 50% four weeks after a single treatment.

With almost 40% of the hyperhidrosis market currently being treated with intradermal injections of botulinum toxin, we believe there could be significant opportunity for DMT410 to break into this market and replace intradermal injections of botulinum toxin.

Based on DMT410’s ability to effectively deliver botulinum toxin to the dermis as observed in the Phase 1 axillary hyperhidrosis trial, we also conducted a Phase 1 POC trial of DMT410 for the treatment of multiple aesthetic skin conditions, including reduction of pore size, sebum production, and fine lines, among others.

In November 2021, we announced top-line results from this trial, where we saw promising data that we believed warranted further investigation of DMT410.

On January 17, 2025, we entered into a Clinical Trial Collaboration Agreement (the “Clinical Trial Agreement”) with Revance Therapeutics, Inc., who recently merged with Crown Laboratories, (“Revance”), pursuant to which we in collaboration with Revance intend to conduct a multi-center Phase 2 clinical trial to evaluate the topical application of XYNGARI™, with DAXXIFY® (daxibotulinumtoxinA-lanm), Revance’s botulinum toxin type A, for the treatment of axillary hyperhidrosis (the “Trial”).

Application of XYNGARI™

The Spongilla is processed into a fine powder and packaged into 2g pouches with a 6mL bottle of 3% H 2 O 2 (hydrogen peroxide).

Once per week, patients mix the powder with hydrogen peroxide, and massage the mixture onto their skin;

after 10-15 minutes the product is easily removed with water.

We believe that the current medical and aesthetic dermatology landscape lacks innovative treatment options, with new treatments predominantly being the introduction of reformulations or combinations of old molecules.

We believe this lack of innovation provides an ideal opportunity for us to change how patients treat their skin conditions.

With our anticipated once weekly treatment schedule and product candidate derived from a natural source, we believe we can become a leader in the space that may improve patient compliance with minimal side effects and a rapid time to treatment effect, as seen in our multiple clinical trials in acne, psoriasis, hyperhidrosis and aesthetic conditions.

If we can successfully develop our product candidates, receive FDA approval, develop a concentrated prescribing base of dermatologists, and utilize our management’s prior experience, we believe we have the ability to build a commercial organization to develop and commercialize treatment options in our core areas of focus within the dermatology space.

Our Clinical Development Pipeline and Product Candidates

Our clinical development pipeline currently consists of XYNGARI™ and DMT410, each in development for multiple skin diseases and conditions.

In the accompanying section we will describe each product candidate, its benefits, and our market strategy for each product candidate.

The dates reflected in the below table and sections are estimates only, and there can be no assurances that the events included in the below table or sections will be completed on the anticipated timeline presented, or at all.

Moderate-to-Severe Acne.

In December 2023, we began enrolling patients in the first of two Phase 3 clinical studies of XYNGARI™ for the treatment of moderate-to-severe acne, entitled the Spongilla Treatment of Acne Research (STAR-1) study.

Each study will be double blind, randomized, placebo controlled, and enroll over 500 patients, age 9 years or older across sites in the United States and Latin America.

The primary endpoints will include the absolute reduction in inflammatory and noninflammatory lesions and the improvement in investigators global assessment (IGA) of acne as were used in our XYNGARI™ Phase 2b acne study.

Patients will be treated once a week for 12 weeks with either XYNGARI™ or placebo and will be evaluated monthly.

In November 2024, we completed enrollment of the STAR-1 study with a total of 520 patients.

The STAR-1 Phase 3 study is expected to have top-line results in the March of 2025 .

Previously, we completed a randomized, double-blind, multicenter, placebo-controlled Phase 2b clinical trial of XYNGARI™ for the once weekly treatment of moderate-to-severe acne.

XYNGARI™ showed statistically significant improvement versus placebo for all three endpoints (inflammatory lesion counts, non-inflammatory lesion counts, and IGA), after only four topical treatments and continued to statistically separate from placebo through the end of study at week 12.

We believe these results from once weekly applications may favorably position XYNGARI™ as a first-in-class product in the market for the treatment of moderate-to-severe acne, if approved.

Mild-to-Moderate Psoriasis.

In October 2021, we completed a Phase 1b POC trial of XYNGARI™ for the once weekly treatment of mild-to-moderate psoriasis.

Plaque psoriasis is a chronic, inflammatory skin disease that comprises approximately 80% of the psoriasis market as of 2019, according to Fortune Business Insights Market Research Report, a majority of patients have mild-to-moderate disease which makes them less likely to receive an approved biologic treatment, that are only indicated for patients with moderate to severe disease, as a first line therapy.

Due to the large population of patients who suffer from mild-to-moderate psoriasis, and lack of effective topical therapies for more mild disease, we believe there is a large unmet need for an effective topical product with limited side effects.

Based on the data in our Phase 1b POC trial, the in-vitro data of XYNGARI’s™ reduction of IL-17A and IL-17F, and the anti-inflammatory effects we observed in its Phase 2b trial for acne, we believe XYNGARI™ may be used as a first-line therapy for patients suffering from mild-to-moderate psoriasis who are not candidates for biologic treatments.

In October 2021, we announced top-line results from our Phase 1b POC trial of XYNGARI™ for the treatment of 30 mild-to-moderate patients with psoriatic lesions covering between 2% to 30% of their body surface area.

Patients were treated with XYNGARI™ once a week for 12 weeks.

Based on the efficacy, safety and tolerability profile observed in the POC trial, we initiated additional work to better inform our clinical trial design prior to moving into a larger Phase 2, placebo-controlled, clinical trial.

We plan to continue development of XYNGARI™ for the treatment of psoriasis upon the acquisition of additional financial resources to support such development.

We are developing the second product candidate from our Spongilla platform, DMT410, for the topical treatment of skin diseases and aesthetic conditions typically treated with multiple intradermal injections of botulinum toxin.

Currently, botulinum toxin must be intradermally injected multiple times to successfully deliver enough botulinum toxin to produce the desired effect in the desired treatment area.

While injections are effective for many different diseases and aesthetic conditions, they limit botulinum toxin’s use for additional conditions where injections, especially intradermal injections, are difficult, painful, or otherwise not viable.

Some of these conditions include hyperhidrosis, acne, acne scars, and various aesthetic indications, of which DMT410 could be a viable treatment option.

DMT410’s treatment regimen uses one application of our XYNGARI™ followed by one topical application of botulinum toxin.

The Spongilla powder is mixed with a fluidizing agent and is massaged into a patient’s treatment area by the treating physician to enhance spicule penetration to create microchannels into the dermis.

After 10 to 15 minutes, the physician removes the Spongilla mask with water.

The physician then expresses botulinum toxin from a syringe in precise amounts and onto the patient’s skin.

The botulinum toxin is then massaged into the treatment area to take advantage of the microchannels created by the Spongilla’s spicules, which allows the botulinum toxin to penetrate the stratum corneum and enter the dermis.

We believe this treatment application will enable the topical delivery of botulinum toxin into the dermis for the treatment of a variety of medical diseases, including for the treatment of hyperhidrosis, acne, and acne scars, as well as improving the skin’s luminosity, brightness, and reducing pore size and count, fine lines, and sebum production.

We believe DMT410’s topical delivery of botulinum toxin can greatly increase market opportunities for botulinum toxin due DMT410’s needle-free application, targeted intradermal delivery, thus potentially expanding the aesthetic market for botulinum toxin.

To date, we have completed an open-label Phase 1b POC clinical trial of DMT410 for the treatment of axillary hyperhidrosis and an open-label Phase 1b POC clinical trial in multiple aesthetic skin conditions.

The Phase 1b POC trial for axillary hyperhidrosis consisted of 10 patients receiving one treatment of DMT410 to each axilla.

Four weeks after one treatment with DMT410, patients exhibited a reduction in sweat production.

The clinical endpoints for this trial included (i) percent of patients with greater than 50% reduction in gravimetrically measured sweat production from baseline, (ii) percent of patients with gravimetric sweat production less than 50mg, and (iii) percent change in gravimetric sweat production.

Four weeks after one treatment with DMT410, 80% of patients experienced a decrease in gravimetric sweat production greater than 50%, 85% of patients recorded gravimetric sweat production of less than 50mg, and patients had an average decrease in gravimetric sweat production of 75% from baseline.

We believe these results demonstrate that DMT410 may aid in the topical delivery of botulinum toxin into the dermis for a treatment effect similar to multiple (estimated 15-20) intradermal injections of botulinum toxin.

With DMT410, we believe botulinum toxin may be applied topically to penetrate the skin into the dermis without the need for multiple injections.

We also completed an open-label, ten (10) patient, Phase 1b POC trial of DMT410 for the treatment of multiple aesthetic skin conditions (pore size, Global Aesthetic Improvement, brightness, luminosity, sebum production, fine lines, glabellar lines, forehead lines, and lateral canthal lines) and announced topline results in November 2021.

In our Phase 1b POC trial of DMT410, patients received one treatment of DMT410 and were evaluated every four weeks for a total duration of 16 weeks to determine DMT410’s safety and tolerability profile, effectiveness, and its duration of treatment effect.

We announced top-line results in November 2021, where we observed an improvement in many of the trial’s endpoints.

At week 8, 80% of patients had at least a 25% improvement in their Global Aesthetic and 60% of patients had a 25% improvement in pore size.

Also at week 8, 90% of patients had at least a one-point improvement in luminosity and 60% of patients had at least a one-point improvement in brightness.

These physicians graded results were supported by objective analysis provided by Canfield Scientific’s VISIA and PRIMOS visual analysis camera systems.

Based on these results, we continue to actively discuss partnership opportunities with botulinum toxin companies to continue development of DMT410 in a larger placebo-controlled Phase 2 trial where we can study multiple doses of botulinum toxin applied to the entire face.

We believe these results, combined with our results in hyperhidrosis, clearly demonstrate how DMT410’s combination regimen could greatly expand the potential indications for botulinum toxins for aesthetic skin conditions, as well as other dermatologic skin diseases such as hyperhidrosis, acne, or acne scars.

In January 2025, we entered into the Clinical Trial Agreement with Revance pursuant to which we in collaboration with Revance intend to conduct a multi-center Phase 2 clinical trial to evaluate the topical application of XYNGARI™, with DAXXIFY® (daxibotulinumtoxinA-lanm), Revance’s botulinum toxin type A, for the treatment of primary axillary hyperhidrosis.

Under the Clinical Trial Agreement, we intend to sponsor, conduct, and fund a Phase 2a clinical trial to evaluate the safety, tolerability and preliminary efficacy of XYNGARI™ and DAXXIFY® versus XYNGARI™ and placebo in patients with moderate-to-severe axillary hyperhidrosis for 16 weeks.

The axillary hyperhidrosis trial is anticipated to be randomized (1:1:1:1), double-blind, dose-ranging, placebo-controlled, and intends to enroll approximately 48 patients across sites in the United States.

The endpoints are anticipated to be (i) the percent of patients with greater than 50% reduction in gravimetrically measured sweat production from baseline, (ii) the percent of patients with gravimetric sweat production less than 50mg, and (iii) the mean absolute change from baseline in gravimetrically measured sweat production.

Patients are anticipated to be evaluated at four regular intervals.

Under the Clinical Trial Agreement, Dermata and Revance will form a joint development committee to facilitate communications between the parties related to the Trial.

There can be no assurance that XYNGARI™ or DMT410 will receive FDA approval for any of the foregoing indications.

We plan on in-licensing, developing and commercializing differentiated medical and aesthetic dermatology product candidates for the treatment of various skin diseases and conditions, which we believe have significant unmet needs in the market.

We are a scientific leader in skincare, dedicated

to the development and commercialization of products that address common and underserved skin conditions.

Dermata initially was founded

with a focus on researching and developing prescription products subject to the FDA approval process.

As part of this focus, we had one

lead asset, referred to as XYNGARI, also known as DMT310, which we had been studying in clinical trials for the treatment of moderate-to-severe

In March 2025, we announced that we achieved statistically significant results from our Phase 3 STAR-1 clinical trial of XYNGARI,

formerly our lead prescription (“Rx”) candidate incorporating our Spongilla lacustris for moderate-to-severe acne.

XYNGARI demonstrated statistically significant results across all three co-primary endpoints at weeks 4, 8, and 12 when compared with

Following the successful completion of the STAR-1 trial, we conducted a full assessment of the Rx acne landscape and the future

Rx acne development pathway for XYNGARI.

In September 2025, after an extensive review of current trends in dermatology, changing consumer

preferences, additional non-clinical and clinical development costs, and go-to market costs for an Rx acne product, management, with support

from our board of directors, determined that a strategic shift to developing and distributing DTC and B2B skincare products, that are

backed by science, would be a better path to commercialization with potentially greater financial upside and faster time to market.

believe we can leverage our history and knowledge of Rx dermatology to create skincare products that are effective and safe, and available

to consumers without the nuisance of obtaining a prescription.

We believe this strategic repositioning will accelerate our path to commercialization,

reduce our regulatory burden, and decrease development expenses, all while enabling us to address broad consumer segments in the skincare

We believe the skincare market, from a cosmetic,

OTC, and Rx perspective, has seen a substantial shift towards consumers first relying upon multifaceted cosmetics and OTC products that

simplify routines.

Consumer preferences are changing to favor natural products that do more for their skin.

There appears to be a resurgence

of interest in traditional remedies to treat various conditions.

We have also seen an increasing trend towards the use of OTC treatments

for common skin diseases such as acne vulgaris (or “acne”), psoriasis vulgaris (or “psoriasis”), and acne rosacea

(or “rosacea”).

The causes, symptoms, and treatments for common skin issues, like acne, have over 50 million patients in the

U.S., and are well researched by consumers due to the extensive publicly available information.

Thus, we believe consumers are more willing

to conduct and trust their own research and treat these diseases with OTC offerings prior to seeing a dermatologist.

Over 70% of patients

with acne first choose to try multiple OTC products to treat their acne before seeing a dermatologist.

However, many of the currently

available OTC acne products are mildly effective and have many tolerability issues that result in poor patient compliance.

Consumers with

acne that do not get satisfactory results, either due to lack of efficacy or tolerability issues, typically wait about one year before

scheduling a visit with a dermatologist to seek alternative therapies.

Additionally, due to the cost-effective pricing of OTC products,

as compared to Rx products, a desire for self-administration, difficulty getting appointments with dermatologists, or insurance coverage

for branded Rx products, many consumers are first relying on OTC products to fill their treatment needs.

We believe that if we can provide

consumers with a unique topical acne treatment, we have an opportunity to capture a large segment of acne patients prior to them seeking

Rx products through a physician.

While this is a major shift in strategy for our company, we believe pursuing the commercial sale of both

cosmetic and OTC skincare products is the best path forward to meet our mission of providing consumers with efficacious and safe skincare

treatment options.

We view this shift in consumer preferences as

a significant benefit for our strategic repositioning.

We have gained substantial clinical knowledge of various dermatology diseases and

skin conditions.

We plan to leverage this knowledge to create a whole product line of skincare treatments that consumers can access directly

for each of their skincare needs.

While our background is in clinical products, we plan to leverage the unique attributes of our hero

ingredient, Spongilla lacustris , to develop both cosmetic and OTC skincare treatments.

We plan to launch our first cosmetic product

in the middle of 2026, with our first OTC acne product to follow shortly thereafter.

In the future, we plan to offer additional products

that target specific needs of consumers.

For example, for consumers who want to improve the general appearance of their skin we plan to

commercialize a once weekly foundational treatment for skin renewal.

Consumers suffering from many common forms of acne, we plan to offer

our OTC topical acne system.

The foundational treatment will utilize our Bioneedle, which is 100% Spongilla lacustris powder, to

provide a once weekly skin renewal routine that is simple addition to skincare routines.

This kit will contain our Bioneedle which will

be combined with a fluidizing agent for easy application.

Our Bioneedle is derived from a wildly grown freshwater

sponge, Spongilla lacustris or Spongilla , which is processed into a fine, purified powder and packaged with no additives.

Spongilla is a unique freshwater sponge that only grows in commercial quantities in select regions of the world, which gives our

Bioneedle its distinctive organic and mechanical properties.

The combination of a proprietary harvesting protocol, developed by our exclusive

supplier, and the post-harvest processing procedures, produce an ingredient that we believe optimizes the mechanical components, which

are silica microstructures also called spicules, as well as the organic components of Spongilla , while eliminating any harmful bacteria

that could be found in many freshwater or marine sponges.

Keeping our clinical roots in mind, we plan to offer an acne system that has

been dermatologist tested.

Our weekly Bioneedle treatment, aimed to help

refine the appearance of a consumer’s skin, will be used alongside a daily salicylic acid wipe to help fight the acne lesions.

believe the unique attributes of our clearing treatment used in tandem with an OTC monograph active ingredient (salicylic acid) could

produce a superior OTC product unlike anything currently on the market.

We plan to develop and distribute a variety of cosmetic and OTC

products that are backed by science and are easily accessible by consumers who are more comfortable treating their skin problems independently

with readily available therapies.

Our core values will remain unchanged during this strategic shift as we strive to provide consumers

with affordable, safe, and effective treatment options, which can be obtained either through our DTC channels or through healthcare professionals,

without having to get a prescription.

We believe consumers are seeking greater flexibility and freedom in treating their skin and we believe

we can offer them a solution.

In addition to the DTC channel for our products,

we believe there is a market for our technology to aid in the intradermal delivery of macromolecules for various aesthetic conditions.

Typically, for facial aesthetics, botulinum toxins are injected into facial muscles to reduce forehead, lateral canthal, and glabella

However, this is limited to the use of intradermal delivery of botulinum toxin for a variety of skin diseases and conditions.

Botox is currently the only approved botulinum toxin for the treatment of axillary hyperhidrosis via intradermal injections.

While effective,

intradermal injections, including 10-15 per axilla, of Botox can be painful for patients and very time consuming for dermatologists.

we believe developing a less painful, less time-consuming topical delivery of botulinum toxin into the dermis for various aesthetic and

medical skin diseases and conditions, would provide physicians with an attractive alternative to intradermal injections of botulinum toxins.

We believe our Bioneedle can increase the number

of intradermal uses for botulinum toxin by leveraging the unique microstructure of our Bioneedle, to create microchannels into the dermis,

enabling improved dermal penetration of botulinum toxins (i.e.

Additionally, we believe our technology can allow for broader coverage

of larger surface areas of the skin, which we believe will provide a better field effect of the botulinum toxin.

We plan to leverage our Bioneedle platform

for broad applicability across dermatologic and aesthetic skin conditions, potentially allowing dermatologists and aestheticians to increase

the use of botulinum toxin.

We believe this non-invasive approach could meaningfully expand the therapeutic and aesthetic utility of botulinum

toxin for conditions such as axillary, palmar, and plantar hyperhidrosis, acne, acne scars, rosacea, and improved facial aesthetics (including

improvements in skin luminosity and brightness, reducing pore size and number of pores, reducing fine lines, and reducing skin oiliness

by decreasing sebum production).

We plan to continue to explore additional uses for this platform and look forward to getting our technology

in the hands of aestheticians and dermatologists so they may better serve the medical and aesthetic needs of their patients.

The Tome Evolution

When we made the strategic decision to switch

to developing DTC products, we wanted to build a new brand that fully encompassed this new endeavor.

We conducted extensive consumer interviews

to learn what today’s skincare consumers think is missing in their skincare routines.

We aimed to find the “white space”

in the vast skincare environment by exploring what products and routines consumers currently use and what is missing.

Through multiple

interviews across multiple cohorts of consumers, we found that while the industry sees acne care, skincare, and beauty as distinct categories,

many consumers see them all as collective acts of self-care.

These consumers who are invested in their skin are not merely looking for

a quick fix but a lasting effect that feels like self-care.

Their skin is unique and they are searching for unique products, and we wanted

to build a skincare brand that meets the needs of these consumers.

We found that these consumers are highly invested in the products they

put on their skin and are willing to purchase products at a premium price.

With these consumers in mind, we set out to build

a brand that maintained our core values, of being honest, natural, and simple.

In a category full of complex ingredients, we believe consumers

want tried-and-true, time-tested products that include natural ingredients that are not manufactured in a lab.

Recent trends in skincare

include the use of beef tallow, holy basil, or kaolin clay.

However, we feel many of these products lack the clinical rigor to warrant

their long-term inclusion in a true skincare routine.

This is why we felt it was the right time to leverage our hero ingredient, Spongilla

lacustris, and its long history of helping people’s skin with the launch of our DTC skincare brand.

We believe this approach

will bridge the gap between the powerful, traditional ingredients and the innovation of today;

to provide consumers with the science to

back up the products they are using on their skin.

With our newfound focus, we sought a brand name

that would embody our drive to develop skincare products that turned time-honored remedies into proven skincare for our mature adopters.

We wanted consumers to feel like experts in the skincare they are using by being able to learn about the ingredients in the products they

are using rather than just reading a label.

We believe our avid skincare users have a true fascination with their skin, and thus, are in

pursuit of knowledge about the best products available.

We believe we can immerse our consumers in our products and especially our hero

ingredient, because it truly is one of a kind.

Which is why we have branded our new skincare line Tome™.

Tome in its literal meaning is a large, important,

scholarly book.

We wanted a name that told the right story, while being rooted in science and learning.

Tome is a name that we believe

will stand out from competitors and forge a deeper connection with consumers and our current and future product offerings.

launch a line of skincare products with our hero ingredient, Spongilla lacustris .

While some cultures have used Spongilla

for various conditions like bruises, arthritis, and some cosmetic conditions, we have studied the entire sponge to learn the true mechanisms

that make it such a unique ingredient.

We plan to make a brand that stands for time-tested ingredients combined with next-generation science

to help consumers reveal their best skin and Tome skincare products will stand as its foundation.

We are currently finalizing the launch

of our first commercial products, which we expect to be available in the middle of 2026.

plan on developing and commercializing differentiated OTC and aesthetic skincare products for the treatment of various skin diseases

and conditions, which we believe have significant unmet needs in the skincare market.

The key components of this strategy are as follows:

Complete development and regulatory approval of XYNGARI™ for acne .

We initiated the first of two STAR-1 Phase 3 clinical studies of XYNGARI™ for the treatment of moderate-to-severe acne in December 2023 and completed enrollment of the STAR-1 Phase 3 trial in November 2024.

We expect to receive top-line results from the STAR-1 trial in March of 2025.

If the results of the STAR-1 trial are positive, in 2025, we plan on initiating the second XYNGARI™ Phase 3 clinical trial entitled STAR-2, followed by a long-term extension study as requested by FDA.

We also plan to initiate the FDA required dermal carcinogenicity studies in rats and the repeat dose dermal toxicity study in minipigs.

Assuming positive results from the Phase 3 program, we plan on submitting a New Drug Application (NDA) to FDA approximately 6 months after completion of the studies.

Explore mutually beneficial partnership opportunities for our XYNGARI™ program.

If we receive positive results from our XYNGARI™ STAR-1 Phase 3 trial, we will look for a partner that may be interested in helping Dermata complete the development of the XYNGARI™ Phase 3 program, with the ultimate goal to commercialize XYNGARI™.

If we are unable to find a mutually beneficial partner for the XYNGARI™ program, then we plan to continue the development program and prepare to file an NDA with FDA.

Expand on the mutually beneficial partnership with Revance for our DMT410 program in hyperhidrosis and aesthetic skin conditions.

In January 2025, we entered into a Clinical Trial Collaboration Agreement with Revance to explore the use of XYNGARI™ with DAXXIFY® for the topical treatment of axillary hyperhidrosis in a Phase 2a clinical trial.

If successful, we will look to expand on the partnership with Revance in other indications.

Complete a Phase 2 trial of XYNGARI™ for the treatment of psoriasis.

In October 2021, we announced top-line results of our Phase 1b POC trial in patients with mild-to-moderate psoriasis.

We believe the results of this POC study warrant further development of XYNGARI™ for the treatment of psoriasis.

If successfully developed and commercialized, we believe XYNGARI™ would be the first once weekly topical product available to treat psoriasis.

The XYNGARI™ program for psoriasis is currently on hold with further advancement subject to obtaining additional financing and/or a strategic partner.

Acquire or in-license additional dermatology programs to our portfolio that complement our current product candidates .

We continuously evaluate potential partnering opportunities that will bolster our current product candidate portfolio and provide substantial value to our organization.

We intend to focus on early to mid-stage development product candidates to generate clinical data and potentially move to later stages of development and ultimately on to commercialization.

Maximize the value of our portfolio by partnering with companies who can assist with commercializing our product candidates in territories throughout the world.

We plan to explore partnerships with companies throughout the world who have established commercial organizations focused on dermatologists.

Further strengthen our intellectual property portfolio, path to new chemical entity, or NCE, exclusivity, raw material supply and advance our regulatory filings.

We plan to continue to strengthen our IP portfolio for XYNGARI™ and DMT410, seek NCE exclusivity for XYNGARI™, maintain our exclusive supply agreement for our raw material requirements, and continue to protect our proprietary information.

We believe these activities will be our primary competitive advantages if our product candidates receive regulatory approval.

The dates reflected in the foregoing are estimates only, and there can be no assurances that the events included will be completed on the anticipated timeline presented, or at all.

Further, there can be no assurance that we will be successful in the development of XYNGARI™ or DMT410, or any other product candidate we may develop in the future, or that XYNGARI™ or DMT410, or any other product candidate we may develop in the future, will receive FDA approval for any indication.

Dermatology Market Overview

We are currently focused on the medical and aesthetic dermatology markets, which include multiple common and undertreated skin diseases and conditions such as acne, psoriasis, hyperhidrosis, and multiple aesthetic skin conditions, some with no currently approved products, including the reduction of fine lines, pore size, sebum production and improvement in luminosity and overall skin quality.

We believe these diseases and conditions cause significant negative impacts on patients’ quality of life, including physical and emotional trauma and social stigmatism, causing patients to constantly seek better treatment options to help improve their conditions.

We also believe these markets have not experienced the same level of development and advances as other markets, as there have been few innovative topical products recently approved other than reformulations or combinations of existing compounds.

We believe our product candidates will be well situated within the market and offer innovative solutions to the underserved medical and aesthetic dermatology markets.

medical dermatology market has experienced significant growth in recent years based on the new treatment options and greater patient access to care.

Based on current market data, the U.S.

medical dermatology market was valued at over $8.3 billion dollars in in 2024 and estimated to be worth over $9.2 billion by 2028.

The American Society of Plastic Surgeons estimates that over 25 million minimally invasive cosmetic procedures were performed in the U.S.

in 2023 of which about 9.5 million used botulinum toxin.

There are many factors that continue to drive growth in the aesthetics dermatology market such as greater patient acceptance, including from younger patients, and the discretionary cash that patients are willing to spend on aesthetic skin care.

We also believe patients have a growing willingness to pay out-of-pocket for effective skin treatments to achieve their desired personal aesthetic look, which further supports the demand and pricing in those markets.

Based on the foregoing, we believe the dermatology market, both aesthetic and medical, offer a low-cost commercialization opportunity compared to many other prescription-based specialty markets, due to the relatively small number of specialists in the dermatology field.

According to the American Academy of Dermatology, in 2023 there were approximately 11,000 dermatologists in the U.S., and we plan to target a subset of these dermatologists, who are larger prescribers of competitive products and who treat a large percentage of patients with our approved indications.

We believe the combination of prescription based and cash-pay based product lines is an attractive business opportunity, as it incorporates multiple aspects of the dermatology market that move independent of the greater healthcare market.

Background of Our Spongilla Technology

Successfully draw awareness to our Tome skincare brand in preparation for the launch of our first commercial products.

We recently announced the name of our new skincare brand, Tome, and are working on building the brand identity for our DTC skincare products, which will represent our core value of providing consumers with skincare products that come from nature but are scientifically proven to work.

Successfully launch our first two commercial products, Tome

Foundational Treatment and Tome Clearing Treatment.

We are currently preparing for the launch of our first two commercial

products, the first one being our Foundational Treatment powered by Bioneedle for skin renewal, expected to launch in the middle of 2026.

The Foundational Treatment will be followed shortly by the Clearing Treatment targeted for the treatment of acne.

We plan to first sell

our products through our website, www.tomeskincare.com , which will be available as a monthly subscription or a one-month kit.

We also plan to sell monthly kits to medical professionals, including aestheticians, med spas, and dermatologists, who wish to offer

in-office treatments for their patients.

We see the combination of these sales channels as a way to reach the greatest number of

consumers suffering from acne and other skin conditions.

Expand our OTC treatment offerings incorporating our Bioneedle

Given the many mechanisms of actions in our technology, we believe we can create a multi-product portfolio of OTC

offerings that treat a variety of skin diseases, including psoriasis and seborrheic dermatitis.

We believe there is potential to

incorporate the unique attributes of our Bioneedle technology in combination with other active ingredients listed on the OTC

monograph to provide consumers with differentiated products that we believe may be as effective as Rx products, but without the need

for a prescription.

Expand our skincare line for the cosmetic market .

With the ever-growing cosmetic marketplace, we see great potential to develop multiple skincare products by incorporating our Bioneedle technology into various serums, gels, and lotions for a variety of skin conditions.

These skincare products could include skin renewal products, which address fines lines as well as the appearance of dark spots.

We continue to work on developing these additional product offerings to meet all the skincare needs of our consumers.

Build a network of certified skincare professionals to deliver in-office Tome therapy sessions.

We plan to build a Tome certification program, where interested aestheticians and other skincare professionals can complete a deep dive certification program of our Tome product offerings.

Such certification will allow exclusive access to discounted products, new product launches, and company events.

We believe this certification program will create a community of skincare professionals who can help market our products to a broad network of consumers.

Acquire or in-license additional skincare products that complement our current products .

We continuously evaluate potential partnering opportunities that will bolster our product portfolio and provide substantial value to our organization.

We intend to focus on product opportunities that are differentiated from other products on the market and can be used for a variety of skin diseases and conditions.

Maximize the value of our portfolio by partnering with companies who can assist with commercializing our products in territories throughout the world.

We plan to explore partnerships and distribution agreements with companies throughout the world who have established commercial organizations focused on skincare.

Further strengthen our intellectual property portfolio, exclusivity, and raw material supply.

We plan to continue to strengthen our intellectual property (“IP”) portfolio for all our products, maintain our exclusive supply agreement for our raw material requirements, and continue to protect our proprietary information.

We believe these activities will be our primary competitive advantages if our product becomes commercially available.

dates reflected in the foregoing are estimates only, and there can be no assurances that the events included will be completed on the

anticipated timeline presented, or at all.

Further, there can be no assurance that we will be successful in the development or commercialization

of Tome products, or any other products we may develop in the future.

Market Overview

skincare market represents a broad and diverse segment of the consumer health and beauty industry, encompassing both OTC products and

cosmetic formulations intended to improve the appearance and condition of the skin.

Within the skincare market, we believe there is ample

white space for innovative and differentiated products to obtain valuable market share.

The cosmetic and skincare industry has experienced

significant growth in recent years, with global markets estimated to reach $736 billion by 2028.

This growth has been driven by a variety

of factors, including increasing demand for natural ingredients, changing consumer attitudes, and the rise of new distribution channels

such as online retail.

broader cosmetic skincare market includes products focused on exfoliation, skin renewal, texture improvement, hydration, and overall

skin appearance.

This segment is driven by consumer interest in preventative care, visible results, and innovative ingredient systems,

and spans mass, prestige, and professional distribution channels.

As a result, differentiation is often driven by formulation innovation,

novel ingredient systems, and clear, compelling product positioning.

We believe skincare enthusiasts are still searching for the next

best skincare product that can deliver results.

recent years, the cosmetic skincare market has increasingly shifted toward products that emphasize active ingredients,

science-backed formulations, and visible performance benefits, often drawing inspiration from dermatology and therapeutic skincare.

In the cosmetics space, there is great interest in natural components, such as plant extracts, antioxidants, peptides, and

probiotics due to their potential to enhance skin health through various mechanisms.

Many of these natural components have been

found to have bioactive compounds including antioxidants, anti-inflammatory, and antimicrobial properties.

This trend has

contributed to the growth of so-called “cosmeceutical” products, which occupy a space between traditional cosmetics and

OTC therapeutics by offering enhanced functionality while remaining within cosmetic regulatory frameworks.

We believe consumers have

a growing interest in exfoliation, skin renewal, texture refinement, and barrier support, as well as in products that provide an

in-office experience but that can be done at home.

We believe these dynamics have supported demand for natural ingredients and

product offerings that can be leveraged across multiple product types and use frequencies, including weekly or periodic treatments

positioned as intensive or corrective steps.

In addition to cosmetic uses, acne remains one of the most significant

and persistent consumer skincare needs, affecting over 50 million adolescents and adults in the US, across a wide range of demographics.

The OTC acne market is characterized by products containing established active ingredients from the OTC monograph, such as salicylic acid,

benzoyl peroxide, and sulfur, and is largely driven by consumer demand for accessible, non-prescription solutions that can be incorporated

into daily or periodic skincare routines.

While the OTC acne market operates alongside the Rx acne market, prescription treatments are

generally reserved for moderate to severe acne cases and may involve higher costs, potential side effects, and ongoing medical supervision,

all while offering limited results.

As a result, over 70% of patients with acne first choose to try OTC acne products and wait at least

one year before seeing dermatologist.

Google searches for “acne treatment” grew by about 19 percent to 424,000 average

monthly searches in 2025 as compared with 2024.

This patient sentiment towards OTC acne products can also be seen in the number of skincare

brands launching new acne products in 2026.

We believe this recent dynamic shift in consumer preferences creates opportunities for differentiated

OTC products that deliver meaningful efficacy while offering improved tolerability, convenience, and alignment with consumers aim to amplify

their skincare routine.

together, we believe these factors underscore the importance of differentiation and scalability in the cosmetic and OTC markets.

that products built around a distinctive hero ingredient, with demonstrated functional benefits, may be well positioned to address consumer

demand for effective, thoughtfully formulated skincare while supporting long-term brand and portfolio development.

We believe this convergence

supports demand for multifunctional products and ingredient platforms that can be adapted across both OTC and cosmetic applications,

providing opportunities for brand extension and long-term portfolio development.

Hero Ingredient – Spongilla lacustris

Freshwater sponges have an exceptionally deep

evolutionary history that dates back millions of years, placing them among the earliest surviving multicellular life forms on the planet.

While most sponges remained in marine environments, a smaller lineage underwent the rare and challenging transition to freshwater habitats,

likely during periods of dramatic geological and climatic change.

This shift required major adaptations, including tolerance to fluctuating

temperatures, variable oxygen levels, and seasonal drying or freezing conditions, largely absent in stable marine settings.

most remarkable innovations was the development of gemmules, highly resistant reproductive structures that allow freshwater sponges to

survive droughts, ice cover, and nutrient scarcity, re-emerging when conditions improve and helping them repopulate each year, making

them a sustainable source.

The therapeutic interest in freshwater sponges

emerged from both traditional medicine and modern biomedical research.

In some folk practices, powdered sponge material was used topically

to stimulate circulation in joints and exfoliate the skin, leveraging the microscopic silica spicules that create controlled microchannels

into the skin.

Modern studies, similar to the ones we have conducted in axillary hyperhidrosis and facial aesthetics, have expanded on

this concept, showing that these spicules can enhance transdermal delivery of active compounds, like botulinum toxin, by temporarily increasing

skin permeability.

Additionally, freshwater sponges produce a range of bioactive molecules—antimicrobial, anti-inflammatory, and

cytotoxic compounds—that help them defend against bacteria and predators in their natural environment.

Spongilla Lacustris Overview

Spongilla lacustris , or Spongilla , is a freshwater sponge from the Spongillidea family that grows in freshwater rivers and lakes in commercial quantities in select regions of the world.

It becomes dormant during the winter months and regrows each year to growth forms ranging from encrusting, to digitate, to branched, depending on its habitat’s growth conditions.

While it grows in many parts of the northern hemisphere, there are only certain locations where it grows in the quantities and of the quality to viably support a commercial pharmaceutical product.

One such location is the Volga River in central Russia, where we have signed an exclusive supply agreement with one of the larger known suppliers of Spongilla raw material for XYNGARI™, which we believe provides us with a reliable source of our supply of Spongilla raw material for the foreseeable future.

Traditionally, locals would harvest small amounts of Spongilla for its perceived medicinal properties and use it as a folk medicine to treat a variety of inflammatory conditions, including arthritis.

Over the last 22 years, our exclusive supplier has refined its harvesting methods and procedures and is now capable of supplying a high-quality raw material that meets our release criteria, year-over-year.

Our supplier has the capacity to collect and process large quantities of Spongilla per year.

We believe our supplier will be able to supply raw material in the quantities and of the quality necessary to support our clinical and commercial needs.

Since entering into the exclusive supply agreement, we have consistently been able to order and receive quantities of raw material to support our ongoing development activities and prepare batches for filing of an NDA.

The traditional use of Spongilla in Russia has provided a large amount of safety data.

In 2003, the Russian Ministry of Health indicated that Spongilla had been used by over one million people per year, with few reported safety issues.

In 2017, we submitted this safety information, along with various other publications and non-clinical studies, in an Investigational New Drug, or IND, application to the FDA’s Division of Dermatology and Dental Products with reference to the FDA’s Botanical Drug Development Guidance for Industry, or Botanical Guidance.

This submission enabled the FDA to approve our IND for XYNGARI™, allowing us to proceed directly into a Phase 2 clinical trial in patients due in part to this historical human exposure.

In 2023, the FDA also confirmed that XYNGARI™ would be filed under a NDA.

While we are still required to complete certain non-clinical and pharmacokinetic studies prior to filing an NDA, we were able to strategically conserve resources while gathering human clinical efficacy and safety data prior to completing such work.

We have since completed an End of Phase 2 Meeting with the FDA which provided us the approval to move into our first ongoing Phase 3 study and provided the framework necessary to file an NDA.

Spongilla’s Multiple Mechanism of Actions

The unique properties of Spongilla lacustris not only allows us to reference the FDA’s Botanical Guidance, but also helps ensure the sustainable regrowth of sufficient supply of raw material each year.

While Spongilla is technically a part of the animal kingdom, it grows and acts more similarly to a plant in that it can completely regenerate every year, even in harsh environmental conditions.

In addition to causing a regrowth of the sponge each year, the harsh environmental conditions in which the sponge lives help contribute to our Spongilla technologies’ multiple mechanisms of actions.

Based on knowledge gained from over 22 years of harvesting Spongilla , our supplier can recognize the necessary environmental conditions and Spongilla characteristics to ensure optimal raw material harvest, maximizing the probability that the raw material contains the necessary properties for an effective pharmaceutical product.

These properties include both mechanical and chemical components that are naturally occurring parts of the sponge raw material and contribute to our Spongilla technology’s mechanisms of action in the treatment of skin diseases and conditions.

The mechanical components of XYNGARI™ come from the Spongilla ’s skeletal structure, which is made up of siliceous spicules that are bound together by organic material, as seen in Image 2 below.

These spicules are smooth, rod-like shapes which come to a point on each end, and if the Spongilla is harvested under our specified environmental conditions, the spicules can average between 150-300 micrometers in length and about 10-15 micrometers in diameter.

While there are other species of freshwater and marine sponges, many of their spicules can be covered in barbs or hooks, as seen in Image 3, which we believe would get stuck in the skin or contain spicules that are blunt on each end, making skin penetration difficult.

Of the many marine and freshwater sponges

available, Spongilla lacustris (“Spongilla”), as seen in Image 1 below, we believe represents the ideal

intersection of nature, science, and visible results, which is why we chose it as a hero ingredient in our skincare products.

remarkable freshwater sponge has evolved highly specialized silica microstructures, that naturally exfoliate the skin, open

microchannels and stimulate renewal, helping to improve the texture and tone of skin, all while reducing blemishes in a way that

feels both effective and intentional.

Beyond its physical properties, Spongilla also contains many organic compounds that may

help improve multiple facets of various skin conditions.

Spongilla also reflects our commitment to thoughtfully sourced,

biologically intelligent ingredients that work in harmony with the skin’s natural processes.

Its long history of topical use,

combined with growing scientific backing, reinforces our belief that powerful skincare solutions can be derived from nature when

guided by rigorous research and responsible innovation.

is a freshwater sponge from the Spongillidea family that grows in freshwater rivers and lakes in commercial quantities in select

regions of the world.

It goes dormant during the winter months and regrows each year through the dispersion of gemmules.

These gemmules

then grow into growth forms ranging from encrusting, to digitate, to branched, depending on its habitat’s growth conditions.

it grows in many parts of the northern hemisphere, there are only certain locations where it grows in the quantities and of the quality

to viably support commercial products.

One such location is the Volga River, where we have signed an exclusive supply agreement with

one of the larger known suppliers of wild harvested Spongilla raw material for our Tome skincare line, which we believe provides

us with a reliable source of our supply of Spongilla raw material for the foreseeable future.

Over the last 23 years, our exclusive

supplier has refined its harvesting methods and procedures and is now capable of supplying a high-quality raw material that meets our

release criteria, year-over-year, for a stable and repeatable natural ingredient.

Our supplier has the capacity to harvest and process

large quantities of Spongilla per year, which we believe will support the quantities and of the quality of raw material necessary

to support our future commercial needs.

Since entering into the exclusive supply agreement, we have consistently been able to order and

receive quantities of raw material to support our ongoing activities and prepare for the planned commercial launch of our once-weekly

For many years Spongilla has been believed

to be effective for various ailments, but only recently have we started to learn what makes it such a unique, multifaceted organism.

our proprietary harvesting protocols and manufacturing procedures, we are able to take Spongilla lacustric raw material and leverage

the combination of evolution and scientific innovation to create a unique product we like to call, Bioneedle.

Bioneedle was created to

unite a biological organism that has been around for millions of years with the latest cutting-edge science in skincare, that we believe

will unleash new possibilities for our consumers.

The unique nature of our Bioneedle creates a skincare ingredient that has both mechanical

and chemical components that are naturally occurring parts of our raw material and contribute to our hero ingredient’s mechanisms

of action in the improvement of skin diseases and conditions.

Mechanical Components .

The mechanical components

of our Bioneedle technology come from the skeletal structure of the Spongilla , which is made up of millions of inorganic siliceous

spicules that are bound together by organic material, as seen in Image 2 below.

These spicules are smooth, rod-like shapes which come

to a point on each end, and when the Spongilla is harvested under our specified protocol, the spicules can average between 200-350

micrometers in length and about 10-15 micrometers in diameter.

While there are other species of freshwater and marine sponges, many of

their spicules can be covered in barbs or hooks, as seen in Image 3, which we believe are not ideal for skincare products as they may

end up getting stuck in the skin.

Other sponges contain spicules that are blunt on each end or curved, making skin penetration difficult

and thus we believe will not permit the successful delivery of various active compounds.

Siliceous Spicules Present in Spongilla

Sponge Spicules

After harvesting and further processing in the U.S., the form and size of our spicules make them the ideal mechanism to penetrate the stratum corneum, the skins barrier, and temporarily create a micro-channel into the dermis without penetrating subcutaneous tissue, where the larger blood vessels are located.

These newly created microchannels temporarily open the skin’s barrier to allow for the targeted delivery of large and small chemical compounds into the dermis.

Most topically applied products currently contain penetration enhancers that help force the active molecule through the stratum corneum and into the dermis, such as Dimethyl Sulfoxide (DMSO).

However, DMSO is only able to help smaller molecules penetrate and is usually unable to aid larger molecules, such as botulinum toxin, in topical delivery.

These penetration enhancers can also cause unwanted side effects such as dry skin or garlic like taste, breath, and body odor.

We believe our Spongilla technology is differentiated by enabling the delivery of both small and large molecules through topical application with less irritation and side effects than other topically applied products.

In addition to creating many microchannels in the skin, we believe the penetration of the spicules can open closed comedones, allowing oxygen into the anaerobic environment of the clogged pilosebaceous glands, where C .

Other Sponge Spicules

After wildly harvesting and final processing in the U.S., the form

and size of our spicules make them the ideal shape to penetrate the stratum corneum, the skins barrier, and temporarily create micro-channels

into the dermis without penetrating subcutaneous tissue, where the larger blood vessels are located.

These newly created microchannels

temporarily open the skin’s barrier to allow for the targeted delivery of large and small compounds into the dermis where they could

have an effect on various skin conditions.

Most topically applied products currently contain penetration enhancers that help force the

active molecule through the stratum corneum and into the dermis, such as Dimethyl Sulfoxide (“DMSO”).

However, DMSO is only

able to help smaller molecules penetrate the stratum corneum and is usually unable to aid larger molecules, such as botulinum toxin, in

topical delivery.

These penetration enhancers can also cause unwanted side effects such as dry skin or garlic like taste, breath, and

We believe our Bioneedle is differentiated by enabling the delivery of both small and large molecules through topical application

with less irritation and side effects than other topically applied products.

In addition to creating many microchannels in

the skin, we believe the penetration of the spicules can open closed comedones, allowing oxygen into the anaerobic environment of the

clogged pilosebaceous glands, where C .

acnes and other bacteria survive.

Lastly, we believe the spicules promote collagen production within the skin which accelerates the skin’s rejuvenation period, thus bringing refreshed skin to the surface at a quicker rate than the skins normal turnover cycle.

Typically, the skin takes between three to four weeks to bring a new layer to the surface, while we believe our Spongilla technology may allow this process to complete in less than one week.

We believe this decreases the time to treat inflammatory skin diseases and conditions while also enhancing the look of a patient’s skin.

Our Spongilla technology also contains multiple active chemical compounds that we believe may aid in our product candidates’ treatment of multiple dermatology skin diseases and conditions.

We believe part of Spongilla’s natural defense mechanism is the creation of organic material to fight off natural enemies present in the water in which it grows.

This organic material binds its spicules together to form the skeletal structure of the sponge.

Based on multiple in-vitro studies, we believe the organic compounds within the sponge, when separated from the spicules, have both anti-inflammatory and antimicrobial properties.

We have observed anti-inflammatory activity including reduction of C .

acnes , stimulated IL-8 production, and the downregulation of the production of IL-17A and IL-17F in human cell lines.

Additionally, in our in-vitro studies, we observed the inhibition of lipogenesis of sebocytes, which may translate to a reduction in sebum production and oiliness of the skin in patients.

While we believe each of the mechanical or chemical components of our Spongilla technology may be beneficial in treating various diseases, we believe the impact of each mechanism may be greatly enhanced when combined with the other.

The large number spicules contained in each treatment create many microchannels through the stratum corneum, allowing for sufficient penetration and delivery of the chemical components into the treatment area to fight inflammation and kill bacteria.

FDA Botanical Drug Development Guidance for Industry

Most currently approved topical dermatology products are reviewed solely by the FDA’s Office of Dermatology and Dental Products and follow a standard approval pathway.

However, due to our lead product candidate, XYNGARI™, being derived from a natural source, it will be reviewed by the FDA Office of Dermatology and Dental Products with input from the FDA Botanical Review Division.

While Spongilla is not a botanical, the FDA has allowed us to reference the Botanical Guidance for raw material quality control and batch to batch consistency through development and into commercialization.

We believe our ability to reference the Botanical Guidance and receive input from the Botanical Review Division on XYNGARI™ provides us with key advantages in XYNGARI’s™ regulatory pathway to approval, if achieved.

These advantages include being able to move into human clinical studies upon the FDA’s acknowledged receipt of our IND letter and subsequent study may proceed, saving us substantial financial resources to achieve human clinical data.

Additionally, while we believe that our sponge contains multiple active chemical compounds, based on our regulatory analysis of the feedback from the FDA and the Botanical Guidance, we believe we are only required to provide identifiable and quantifiable active components to show quality control and batch to batch consistency.

We believe this will make it more difficult for potential competitors to replicate XYNGARI™ due to their inability to know every component of our product candidate and to show their product is similar in its composition.

Thus, we believe a competitor with a similar product or product candidate would have to follow all the manufacturing, development, and regulatory steps we must complete for FDA approval.

However, there can be no assurance that we successfully navigate the development of XYNGARI™ or that XYNGARI™ will receive FDA approval.

Our Product Candidates

Our lead product candidate, XYNGARI™, is a unique, once weekly, naturally derived topical product, first being developed for the treatment of moderate-to-severe acne, or acne.

It is derived from freshwater Spongilla lacustris , or Spongilla , which grows under certain environmental conditions in select locations throughout the northern hemisphere .

Our Spongilla raw material is harvested by our exclusive partner in Russia abiding by strict protocols based on our supplier’s 22 years of experience and our expertise in an ideal pharmaceutical product.

The result of these strict protocols is a consistent chemical structure that is reproducible year after year, which is critical in producing a material able to be used in a pharmaceutical product.

After harvesting, the Spongilla is shipped to our manufacturing facility in the U.S.

for further processing into a uniform powder before being packaged into sachets.

Immediately prior to treatment the patient will mix the powder with a diluent (hydrogen peroxide) to form a paste, which the patient can then apply to the treatment area to treat the multiple facets of their disease.

XYNGARI™ utilizes the Spongilla’s mechanical spicules to help resurface a patient’s skin while also creating microchannels through the stratum corneum to allow the penetration of the Spongilla’s naturally created organic compounds to help treat various skin diseases.

We believe these organic compounds can travel through the newly created microchannels into the dermis and sebaceous glands where both inflammatory and non-inflammatory acne lesions originate.

XYNGARI™ targets treatment of the multiple facets of acne by combining the substantial mechanical and chemical activity of Spongilla into an easy to apply product that only needs to be applied once weekly.

If approved by the FDA, we believe the combination of the mechanical and chemical properties of XYNGARI™ has the potential for a more rapid time to treatment effect with fewer treatments, less side effects, and better tolerability than other currently marketed topical acne products.

XYNGARI™ for Treatment of Acne

Market Opportunity .

Acne is characterized by areas of scaly red skin, non-inflammatory blackheads and whiteheads, inflammatory lesions, papules, and pustules and occasionally cysts and scarring that occur on the face, neck, chest, back, shoulders, and upper arms.

It affects approximately 50 million people in the U.S., with an estimated 32.6 million diagnosed cases in the U.S.

in 2023, with about 85% of teenagers in the U.S.

Lastly, we believe the spicules promote collagen

production within the skin which accelerates the skin’s rejuvenation period, thus bringing refreshed skin to the surface at a quicker

rate than the skin’s normal turnover cycle.

Typically, the skin takes between three to four weeks to bring a new layer to the surface,

while we believe our spicules may allow this process to complete in about one week.

We believe resurfacing will aid in the time to treat

inflammatory skin diseases and conditions while also enhancing the look and feel of a patient’s skin.

Organic Compounds .

Our Bioneedle

also contains multiple organic compounds that we believe may aid in our products’ improvement of multiple dermatology skin diseases

and conditions.

We believe part of Spongilla’s natural defense mechanism is the creation of organic material to fight off

natural enemies present in the water in which it grows.

This organic material binds its spicules together to form the skeletal structure

of the sponge.

While we believe each of the mechanical and organic

components of our Bioneedle technology may be beneficial in treating various skin conditions, the impact of each mechanism may be greatly

enhanced when combined with the other.

The large number spicules contained in each treatment create numerous microchannels through the

stratum corneum, allowing for sufficient penetration and delivery of the organic components into the treatment area to reduce inflammation

and bacteria.

We plan to incorporate our Bioneedle technology into multiple OTC and cosmetic products that we can sell direct to consumers

and business to business to provide differentiated foundational products for the broad skincare market.

Skincare Product Line

Our product development strategy

is centered on the scalable use of our proprietary Bioneedle as the foundation for any well-rounded skincare routine.

We believe its unique

mechanisms of action and its broad ability to be used alone or in combination for a variety of skin conditions and cosmetic applications,

like acne, psoriasis, skin renewal, fine lines, overall skin improvement, dandruff.

We plan to initially introduce our once weekly foundational

treatment that we believe should be a part of any skincare routine.

This will be targeted towards general skincare enthusiasts seeking

an at home aesthetician product for skin renewal and general skin improvements.

We also plan to offer additional products to the foundation

treatment, for those consumers suffering from specific types of skin issues, like acne, psoriasis or dandruff.

We believe there are many

consumers that want an effective OTC product without needing to seek out a prescription from a dermatologist.

We plan to first launch

the foundational treatment in the middle of 2026 with the launch of the acne treatment shortly thereafter.

Then, based on future consumer

research and feedback, we plan to launch additional treatments for additional skincare needs.

While the once weekly foundational treatment

represents the first commercial demonstration of our Bioneedle technology, we believe the underlying technology has broader applicability

to be used in both OTC therapeutics and cosmetic skincare categories.

We believe that by leveraging a foundational ingredient, like our

Bioneedle, across differentiated formulations and use cases, we can efficiently develop a cohesive portfolio of effective skincare products

while reinforcing our mission to forge a new realm of skincare that is powerful, not punishing.

Our team believes this platform approach

provides flexibility for future innovation, supports line extensions over time, and positions us to address a wide range of consumer skin

concerns beyond acne.

We call this skintech at home.

Treatment – powered by Bioneedle

first commercial product to launch will be our Foundational Treatment, consisting of a once-weekly treatment, designed to renew

a consumer’s skin so it feels fresh each and every week.

We plan for the Foundational Treatment to be the base of any

well-rounded skincare routine that blends timeless treatments with potent transformations.

Through innovative science and deep research,

we created a novel, foundational treatment that is based in powerful, natural ingredients.

We believe the combination of these unique

components in a thoughtfully designed treatment could deliver an aesthetician like experience right at home.

Market Overview .

The beauty industry is

undergoing a dynamic change, with consumers demanding transparency and clear ingredient lists.

Consumers are searching for multifunctional

products to simplify their routines while valuing brand loyalty and sustainable practices.

There has been a clear and significant trend

for natural cosmetics, which some refer to as pure beauty.

This does not mean that brands can just claim their products are natural and

expect consumers to believe them.

Consumers are taking an active role in determining what they consider “natural”, with one

survey finding that 60% of women are willing to invest in new products that prioritize natural products.

In addition to looking for products

with natural ingredients, consumers also want their skincare products to be multifunctional.

This new trend has been referred to as “skinminimalism,”

which emphasizes the benefits of simplified skincare routines.

Consumers are looking to use less products, so they want the products they

do use to do more by providing multiple benefits.

While this typically means products will contain 2, 3, or 4 active ingredients, we believe

we can offer another option with a product that is 100% Spongilla lacustris to address multiple skincare issues.

Our Solution for Skincare.

Foundational Treatment powered by Bioneedle, will be a once weekly application to help simplify a consumer’s skincare routine

while providing multiple benefits for their skin.

We believe this product can be the foundation for any consumer who is looking for

healthier and clearer skin.

Whether they are an avid skincare user or someone that is just looking for an easy fix to their skin

issues, we believe our Foundational Treatment can meet their needs.

With consumers now looking for natural products that

perform multiple tasks at the same time, we believe this is the ideal time to be launching our first product with our Bioneedle as

the foundation.

In addition to using 100% natural Spongilla

powder, our Foundational Treatment will only need to be applied once per week to provide the appearance of skin renewal that

consumers desire.

Most other products on the market need to be applied daily, sometimes multiple times per day, or consumers must seek

the help of a skincare professional for more invasive peels and laser treatments.

Therefore, we see our once weekly application as an

immediate differentiator to currently available product offerings.

Whether it is in addition to what they already use for their skincare,

or if they feel it can replace many of the products they currently use.

With an easy weekly application, we believe our Foundational

Treatment can become the basis for any good skincare routine.

The Bioneedle .

The main part of this

treatment is a powder containing our hero ingredient, Spongilla lacustris .

As discussed above, this unique ingredient is

multifaceted and we believe it has the ability to improve the quality of the skin.

Our Bioneedle is wildly harvested and powdered to

leverage its unique skin renewal properties.

It is a combination of unique spicules and organic compounds that we believe work

together to exfoliate the skin, aid in skin renewal, reduce blemishes, all while improving skin texture and quality.

We believe the

Bioneedle is ideal for consumers that need either deep renewal or general skin support due to the combination of precision

mechanical resurfacing with organic, skin-conditioning ingredients to support a clearer complexion without relying on harsh

stripping agents.

The Activator .

The second component of

the Foundational Treatment system is an activating solution that is mixed with the Bioneedle powder to form a matrix.

This activating

solution contains hydrogen peroxide that helps oxidize the powder and liberate the sponge spicules so they may more freely penetrate the

skin upon application.

Hydrogen peroxide was first produced in 1818 and has been used in many applications at varying strengths including

therapeutics, chemical application, biological function, and used as an oxidizing agent.

Clearing Treatment – for acne

While we believe that all consumers can eventually

achieve the clear skin they always wanted with our Foundational Treatment, we know there are some whose skin needs a little

extra help, which is why we plan to offer targeted systems to meet the specific needs of our skincare consumers.

The first targeted OTC

system we plan to offer is our Clearing Treatment, which will be focused on the treatment of many common forms of acne.

Our Clearing Treatment

is designed to fight acne with salicylic acid, widely recognized for the treatment for acne, and our Bioneedle, selected for its ability

to enhance exfoliation and support improved delivery of actives to the skin.

This combination is intended to provide a more comprehensive

and efficient treatment experience than existing acne offerings, while potentially improving the look and feel of the skin.

to launch the Clearing Treatment shortly after the launch of our Foundational Treatment.

Market Overview .

Acne is one of the most

common dermatologic diseases and can be a significant health burden.

Acne is characterized by areas of scaly red skin, non-inflammatory

blackheads and whiteheads, inflammatory lesions, papules, and pustules and occasionally cysts and scarring that occur on the face, neck,

chest, back, shoulders, and upper arms.

It affects approximately 50 million people in the U.S., with an estimated 32.6 million diagnosed

cases in the U.S.

in 2023, and about 85% of teenagers in the U.S.

experiencing some form of acne.

prescription acne market had approximately $2.6 billion in prescription pharmaceutical sales in 2016 and is expected to reach approximately $3.8 billion in 2026 according to GlobalData Inc.

Most patients experience some form of acne during their teenage years and for some, their acne may diminish over time, or at least tends to decrease by age 25.

There is, however, no way to predict how long it will take for acne to disappear entirely, with some individuals suffering from acne well into their 30s, 40s and beyond.

While not life-threatening, acne causes significant trauma for those suffering from it due to social stigmas, substantial risk of permanent facial scarring, lowered self-esteem and social withdrawal.

Therefore, we believe early and aggressive treatment with an effective, once weekly, topical product may lessen the overall long-term impact of this disease and may lead to an increase in a patient’s quality of life.

Due to acne’s negative impact on a patient’s quality of life and negative impact on facial aesthetic, patients suffering from acne tend to be highly motivated to treat their acne and we believe willing to pay more out-of-pocket for higher priced and highly effective treatment, like XYNGARI™.

It is our belief that patients seeking an easy to use and effective topical product will tolerate less favorable reimbursement rates than for other prescription products for other indications, allowing for favorable pricing if we are able to eventually obtain approval for and successfully commercialize XYNGARI™ for acne.

Furthermore, if approved, we believe that XYNGARI™ natural characteristics may allow us to expand our addressable acne market to include those patients who value using naturally derived products, such as XYNGARI™.

The acne market can be broken into three separate classes based on the severity of the acne:

acne treatment products reached

approximately $1.7 billion in sales in 2025, which was up five percent from the previous year.

Most consumers experience some form of acne during their teenage years,

but there is an increased frequency reported in adults with almost 20% of adult women and 8% of adult men experiencing some form of acne.

While not life-threatening, acne can cause significant trauma for those suffering from it due to social stigmas, visual manifestation,

substantial risk of permanent facial scarring, lowered self-esteem and social withdrawal, all affecting a patient’s quality of life.

Therefore, we believe early and aggressive treatment with an effective, once weekly, topical product may lessen the overall long-term

impact of this disease and may lead to an increase in a patient’s quality of skin and life.

Due to acne’s negative impact on a patient’s

quality of life and impact on facial aesthetic, consumers suffering from acne tend to be highly motivated to treat their acne and we believe

are willing to pay more out-of-pocket for high-value-add treatments, like our Clearing Treatment.

It is our belief that consumers seeking

an easy to use and effective topical product will prefer our OTC acne product, rather than lower priced, less effective OTC products or

having to set up an appointment with a dermatologist, only to be prescribed an inferior product.

Furthermore, once commercially available,

we believe that our Clearing Treatment’s unique characteristics may allow us to expand our addressable acne market to include those

consumers who may have first thought to seek a prescription treatment, but now see an effective OTC product, like our Clearing Treatment,

as first line therapy.

acne market can be broken into three separate classes based on the severity of the acne:

characterized by few papules or pustules;

typically treated with over-the-counter products or topical prescription therapies.

Moderate Acne:

typically treated with OTC products or topical prescription therapies.

characterized by multiple papules and pustules with moderate inflammation;

typically treated with a combination of oral and topical prescription therapies.

typically treated with a combination of oral and

topical prescription therapies.

characterized by substantial papules and pustules, with many nodules and/or cysts and significant inflammation;

currently treated with oral and topical combination treatments and photodynamic therapy as a third-line treatment option.

Limitations of Current Standard of Care .

While current treatment options may be effective for some patients, there are many limitations and drawbacks of current acne products which cause poor patient compliance.

All currently approved topical therapies for the treatment of acne must be applied once or twice a day to allow an accumulation of the active ingredient within the skin to effectively treat the disease.

This requirement to apply multiple times per day becomes very onerous and time consuming for patients, causing many patients to fail to comply with the strict application regimen and/or skip multiple treatments.

Proper use and application schedules are particularly important for topical acne products and poor patient adherence may lead to reduced treatment effect and ultimately discontinuation of treatment by the patient due to the lack of effect.

Many current acne products, such as retinoids that must be applied at least once or twice-a-day, may cause significant stinging, burning, and peeling after each application.

These tolerability issues, which may start occurring after the first application, and the substantial discomfort they cause, lead many patients to discontinue the necessary daily application schedule or the use of the product altogether.

It is well known that benzoyl peroxide, or BPO, leads to drying of the skin and that retinoids result in many local skin reactions including erythema, burning, and peeling, after the first treatment.

It has been observed in the combination study of adapalene/BPO, where more than 20% of the subjects reported moderate or severe erythema and stinging/burning.

Lastly, most topical products have an unavoidable latency period of 6-8 weeks until patients have a definite improvement in their acne lesions.

This means they may have to endure 30 to 60 applications before observing that their acne is improving (assuming a daily, or twice daily regimen), all while dealing with the burning, stinging, and peeling that may accompany these topical products.

We believe that teenagers, who make up the largest segment of the acne market, become impatient with the lack of rapid perceived effect leading to premature discontinuation of treatment.

The lack of rapid treatment effect, side effects, and onerous application schedules all greatly contribute to patient noncompliance issues and could ultimately lead to treatment failure for current topical therapies.

We believe patients are more concerned with rapid efficacy outcomes and low side effects than costs, thus we believe patients will be more willing to pay higher out of pocket costs for a product that has these attributes.

Our Solution for Moderate-to-Severe Acne.

If approved, we believe XYNGARI’s™ once weekly application regimen and apparent rapid treatment effect will increase patient compliance, potentially increasing the likelihood of improved acne results.

Using our multifaceted, once weekly Spongilla treatment technology, we are developing XYNGARI™ to create a paradigm shift in how acne is treated by dermatologists by attempting to make XYNGARI™ the preferred treatment option for all acne patients.

We have designed XYNGARI™ to treat the multiple factors of acne while also attempting to increase patient compliance through ease of use and acceptable tolerability profile.

If approved, we believe XYNGARI™ has the potential to remedy many of the negative characteristics associated with current topical therapies for moderate-to-severe acne, including cumbersome treatment regimens, negative side effects (including burning, stinging, itching or dryness, which may occur as early as the first treatment and continue daily thereafter), and delayed time to effectiveness (which may take up to eight weeks).

XYNGARI™ is designed to be applied only once a week, rather than once or twice a day.

We believe a once weekly schedule may be conducive to high patient compliance as it is less onerous for the patient.

In addition, in our Phase 2b acne trial, on average, patients experienced an approximately 45% reduction in inflammatory acne lesions after just four treatments, with continued improvement of up to 62% reduction of inflammatory lesions at 12 weeks.

Further, approximately 90% of patients had no, or mild, tolerability issues at the end of the 12-week trial and no patients experienced any severe tolerability issues.

In addition, in our Phase 2b trial we observed that XYNGARI™ started showing a statistically significant difference from placebo for all three endpoints after just four treatments while also having a rapid reduction on inflammatory and non-inflammatory lesions.

We believe this rapid visible response encouraged patients to continue to comply with the once weekly application schedule leading to a continued reduction in their lesions until the end of trial at week 12.

Thus, we believe that a topical product that only needs to be applied once weekly with a quicker time to perceived treatment effect and fewer tolerability issues may result in greater treatment success due to improved patient compliance leading to loyal and repeat users.

XYNGARI™ for the Treatment of Mild-to-Moderate Psoriasis

We believe that XYNGARI™ could also be an effective treatment for mild-to-moderate psoriasis based on the clinical data received from our Phase 1b POC trial and the in-vitro effect XYNGARI™ has shown on the down regulation of IL-17A and IL-17F, as well as its ease of application to mild-to-moderate psoriatic lesions with smaller surface areas.

Psoriasis is characterized by “plaques,” or raised red areas of skin covered with a silver or white layer of dead skin cells referred to as “scales.” Psoriatic plaques can appear on any area of the body, but most often appear on the scalp, knees, elbows, trunk, and limbs, and the plaques are often itchy and sometimes painful.

The psoriasis lesions are characterized by hyperproliferation of keratinocytes and a lymphocyte-rich infiltrate consisting primarily of T cells.

In the dermis and epidermis, T lymphocytes interact with antigen-presenting cells and secrete Th1 and Th17 cytokines.

These activated T cells and the inflammatory cytokines they secrete are believed to induce the skin lesions seen in psoriasis.

In addition to the broad anti-inflammatory properties, we have observed in our clinical acne studies, XYNGARI’s™ ability exhibited in-vitro a dose dependent inhibition of both IL-17A and IL-17F, key cytokines implicated in the pathogenesis of psoriasis.

Thus, XYNGARI™ may provide a method to topically deliver targeted anti-inflammatory therapy directly to psoriatic lesions with good local tolerability in an easy to apply regimen.

Market Opportunity.

Currently patients with mild-to-moderate disease are either underdiagnosed, undertreated or untreated.

This leaves patients seeking new and effective treatment options.

Psoriasis is a chronic, inflammatory skin disorder estimated to affect up to 3.2% of the world’s population with global sales of $14.2 billion in 2020, which is projected to increase to $27.5 billion by 2030.

Plaque-type psoriasis is the most common form of psoriasis, occurring in more than 80-90% of cases of psoriasis with approximately 80% of patients experiencing the mild disease form and 20% experiencing moderate-to-severe form of the disease.

In addition to the disfigurement caused by psoriatic lesions, patients also may experience pruritus, or itching, which can be particularly common and bothersome for patients.

Not only does psoriasis cause direct clinical challenges, but patients also suffer a negative impact on their quality of life.

Patients can suffer substantial psychological impacts from their disease, including, social stigmas, feelings of rejections and shame, discrimination in the workplace, and reduced productivity, among many others.

These patients are commonly looking for a safe and effective product to treat their disease.

currently treated

with oral and topical combination treatments and photodynamic therapy as a third-line treatment option.

By leveraging the combination of multiple components

to build our treatment, we believe we can treat all levels of acne, from mild all the way up to severe acne.

Limitations of Current Standard of Care .

Most of the available therapies target moderate-to-severe disease, meaning that mild patients are undertreated with one in five not being happy with their current treatments.

The treatments for mild psoriasis patients are mostly generic but are often inadequate to control a patient’s disease.

Mild psoriasis patients are first treated with topical therapies, like Vtama, Zoryve, Opzelure, and Eucrisa, due to the reduced systemic exposure.

However, patients often feel that topical treatments are one of the negative aspects of psoriasis, which we believe is partly due to the limited options available like, coal tar, retinoids, calcineurin inhibitors and corticosteroids.

While topical steroids are a very common treatment, drawbacks include being able to be used only for a short period of time and are associated with Hypothalamic pituitary adrena axis suppression, skin atrophy (thinning), striae (stretch marks), and telangiectasia (spider veins), among other side effects.

Furthermore, some of these side effects are irreversible, persisting even after therapy is discontinued.

Consequently, high-potency topical steroids are not recommended for chronic use and physicians generally will not prescribe them for treatment on the face.

Also, rebound is a known challenge with steroids, where after steroid discontinuation, the psoriasis returns even worse than it was before steroid treatment was initiated.

While biologic therapies, including drugs such as Enbrel, Cosentyx, Humira, and Stelara, are available for treatment of psoriasis, their use remains highly restricted to patients with moderate-to-severe disease.

In the U.S., with less than 20% of patients having moderate-to-severe psoriasis, we believe a vast majority of the psoriasis market are left without long-term effective treatment options.

While additional data has caused an uptake of biologics, they remain limited due to multiple factors, including being indicated only for use in moderate-to-severe patients, high costs, consequent reimbursement and access restrictions, frequent high patient co-pays, perceived risk of side effects, and patient fear of injection.

Additionally, we believe there is room for topical products that treat mild psoriasis to be priced at a premium compared to other topical products for other inflammatory skin diseases like acne.

This is based on fact that when comparing the cost of biologic therapy, which can cost $50,000 per year, an effective and safe topical product for mild psoriasis could have a large impact on the market.

Therefore, we believe physicians would be more likely to prescribe a topical product for psoriasis long before biologic treatment, and patients experiencing milder psoriasis would prefer using a topical product over a systemic treatment.

Non-biologic systemic therapy options for psoriasis exist, but their use is also limited due to unfavorable side effects.

Apremilast (Otezla), an oral PDE4 inhibitor, generated more than $1 billion in sales in all indications in 2019, but has only achieved a small patient share in psoriasis due to limitations on its use to moderate-to-severe patients, its modest symptomatic improvement, and frequent adverse events.

We believe there is still a great need to bring to market a product that addresses mild-to-moderate psoriasis.

Due to the shortcomings of existing topical therapies and the lack of options providing robust symptomatic improvement with chronic treatment, especially in the last 25 years, we believe there remains a need for a safe, effective, and easily applicable topical treatment for chronic disease, that has a low risk of side effects, is well tolerated, and can be easily applied on all anatomical areas.

Our solution for Mild-to-Moderate Psoriasis .

Similar to the needs of patients with acne, we believe patients suffering with psoriasis might comply better with a treatment that is easy to apply and requires less application time than current treatment options.

XYNGARI™, if approved, could be used as a first line therapy for patients with mild-to-moderate psoriasis.

We believe the spicules within XYNGARI™ will help break up the psoriatic lesions, while the anti-inflammatory components of XYNGARI™ assist with the healing of the lesions.

Due to the historical use of Spongilla and the human safety data collected to date in our clinical studies, we believe XYNGARI™ may be suitable for long term treatment of chronic psoriasis due to its unique treatment effect and acceptable safety and tolerability profile.

In addition to the mechanical effects of XYNGARI™, extracts of the organic material have shown in-vitro to have a dose dependent inhibition of IL-17A and IL-17F secretion.

In the dermis and epidermis, T lymphocytes interact with antigen-presenting cells and secrete Th1 and Th17 cytokines, including interferon-gamma (IFN-g), interleukin (IL)-2, IL-17, IL-22, and tumor necrosis factor alpha (TNF-α).

These activated T cells and the inflammatory cytokines they secrete are believed to induce the skin lesions seen in psoriasis and be a fundamental contributor in the disease’s immune pathway.

We know that there are multiple approved IL-17A inhibitors on the market, such as secukinumab (Cosentyx®, Novartis) and ixekizumab (Taltz®, Eli Lilly and Co.), but these are both biologics and only indicated for patients with moderate-to-severe psoriasis who are candidates for systemic therapy.

The limited patient population who are candidates for these biologic treatments is a small percentage of the overall psoriasis market.

Therefore, a topical product that can inhibit the IL-17 pathway in the skin with minimal systemic exposure would be an ideal option for both physicians and patients.

Based on clinical and non-clinical data generated to date for XYNGARI™, and anecdotal evidence of XYNGARI™ ’s effect on psoriatic lesions, we completed a Phase 1b, open label, POC study in mild-to-moderate psoriasis patients in October 2021.

This trial included once weekly treatments of XYNGARI™ for 12 weeks in 30 mild-to-moderate psoriasis patients with lesions covering 2% to 30% of their body surface area.

The primary endpoints in this trial were the Physician’s Global Assessment, which is a 6-point scale measuring the physician’s assessment of psoriasis severity of the target lesion site, the Psoriasis Area Severity Index scale is also a 6-point scale measuring the psoriatic disease severity taking into account qualitative lesion characteristics (erythema, thickness, and scaling) and degree of surface area involvement and the Pruritus Visual Analog Scale consists of the patient’s measurement of pruritus, or itch, in addition to normal tolerability and safety assessments.

We announced top-line results in October 2021, and based on the efficacy, safety and tolerability profile seen in the POC trial we initiated additional work to better inform the clinical trial design prior to moving into a larger Phase 2, placebo-controlled, clinical trial upon the receipt of sufficient financial resources.

DMT400 for the Topical Delivery of Macromolecules

DMT400 is our treatment regimen that utilizes the unique mechanical features of our Spongilla technology to facilitate the intradermal delivery of macromolecules, such as botulinum toxin, monoclonal antibodies, dermal fillers, or vaccines, by topical application rather than with injections.

These macromolecules are highly effective and approved for the treatment of multiple medical and aesthetic skin conditions and diseases, but currently are not approved in a topical form because the molecular structures are too large to penetrate the stratum corneum, the skin’s outermost defense barrier.

Thus, all current macromolecule treatment options for skin conditions and diseases must be injected, either intramuscularly or intradermally, sometimes requiring numerous injections.

We believe that DMT400’s topical application regimen may provide patients with a topical treatment option for both medical and aesthetic dermatology conditions using products previously unavailable to them in a topical treatment.

Siliceous Spicules Microchannels

DMT400 works by first topically applying our proprietary sponge powder to the treatment area wherein the mechanical spicules of the sponge penetrate the skin, thereby creating microchannels into the dermis as seen in Image 4 above.

Unlike a derma roller or other microneedle technology, our unique spicules remain in the skin for one to two days allowing the microchannel to remain open rather than close up, as they would after using a derma roller.

With the microchannel open for a longer period a macromolecule can be applied topically to the skin and is thus able to penetrate into the dermis.

We believe this topical application of a macromolecule can be massaged into the newly created microchannels thereby facilitating the delivery of the macromolecule, through the microchannel and into the dermis, without the need for injections.

This targeted delivery to the dermis rather than delivery to the systemic circulation, may decrease the systemic spread of these macromolecules thus potentially reducing side effects seen with injections, while increasing targeted application to where the disease resides.

DMT410 for the Treatment of Primary Axillary Hyperhidrosis

We initially tested our DMT400 treatment with our DMT410 program, which consists of a topical application of our proprietary sponge powder followed by a topical application of botulinum toxin, a macromolecule.

DMT410 was initially tested in a Phase 1b POC trial of ten (10) patients with primary axillary hyperhidrosis to determine if our sponge powder could successfully facilitate the intradermal delivery of botulinum toxin and potentially other macromolecules.

Based on the results seen from this study we believe we were successful in delivering active botulinum toxin to the dermis for the treatment of primary axillary hyperhidrosis and potentially other skin conditions.

Market Opportunity .

Hyperhidrosis is a life-altering disorder of excessive sweating out of proportion with thermoregulatory requirements.

While many patients may exhibit this excessive sweating in response to specific triggers, such as emotional stress, others may exhibit symptoms spontaneously.

Typically, the diagnosis of hyperhidrosis is based partly on subjective measures that measure how the excessive sweating affects a patient’s quality of life.

Physicians also gravimetrically measure the amount of sweat produced, though there is no standardized threshold which defines hyperhidrosis.

It is believed to affect an estimated 15 million people in the U.S.

prescription hyperhidrosis market had approximately $66 million in prescription pharmaceutical sales in 2020, and is expected to reach approximately $282 million in 2030, with almost 40% from injections of BOTOX, according to GlobalData Inc.

According to a 2016 update on the prevalence and severity of hyperhidrosis in the U.S., axillary (underarm) hyperhidrosis, is the most common form of the disorder.

However, patients are affected by other forms like palmar (hands) and plantar (feet) hyperhidrosis, which we believe DMT410 may be able to treat and avoid the side effects seen in studies of poor administration of intradermal injections.

Limitations of Current Standards of Care .

While the prevalence of hyperhidrosis is significant, treatment options are limited, and many come with unwanted side effects making patient acceptance low.

Typical first line therapy is usually with aluminum chloride-based antiperspirants, but many have potential drawbacks.

First, daily applications can be time consuming leading to poor compliance among patients.

Second, many antiperspirants are irritating to the skin leading to treatment discontinuation.

Lastly, topical aluminum chloride treatment has a transient duration of effect and requires frequent reapplication to maintain sweat control.

More recently, topical anticholinergics have been investigated and approved, such as Botanix Inc.

(formerly developed by Fresh Tracks, Inc.) and Journey Medical Corporation (formerly developed by Dermira, Inc.), but we believe they tend to have the same side effects as systemic anticholinergics which are used off-label.

These side effects include dry mouth, dry eyes, blurred vision, headache, urinary retention, among others.

The unwanted side effects are often so intolerable that up to one third of patients are forced to withdraw from treatment.

If topical or systemic treatments fail, then patients can get intradermal injections of botulinum toxin which has been shown to have a great treatment effect, but treatment is very technique driven, requiring a trained physician to administer the toxin to the thin layer of the dermis.

Many times, poor treatment response with botulinum toxin is due to incorrect or insufficient dosing or incorrect administration.

Patients may also experience injection site pain or discomfort, which may be accompanied by swelling and bruising.

However, for the treatment of palmar hyperhidrosis with intradermal injections of botulinum toxin, the most notable adverse event is transient hand weakness, if administered incorrectly.

As a last resort, patients may also seek surgery to treat their hyperhidrosis, if less invasive treatment options fail.

While there are treatment options available for hyperhidrosis patients, only about half of affected individuals seek treatment due to social embarrassment associated with the diagnosis of the disease.

We believe this leaves a wide gap in the market for a product that combines the efficacy of botulinum toxin with the safety and tolerability profile of topical therapies.

We believe DMT410, if successfully commercialized, could address this underserved market opportunity.

Our Solution for Primary Axillary Hyperhidrosis.

While primary axillary hyperhidrosis is idiopathic, the mechanism is thought to be neurogenic overactivity of the eccrine (sweat) glands in the affected area.

Based on the summary basis for approval of BOTOX, we know that botulinum toxin type A has a clinical effect on hyperhidrosis, which acts by disrupting sympathetic stimulation to the eccrine glands resulting in considerably reduced axillary sweating from four to 12 months.

Based on the package insert for BOTOX, intradermal injections of 50 units of BOTOX saw a greater than 50% decrease in axillary sweat production in 81% and 41% of patients treated with BOTOX or placebo, respectively, at four weeks.

While intradermal injections of botulinum toxin appear to be very effective, the treatment requires multiple injections into each axilla, which is time consuming for the treating physician and administration is very technique sensitive due to the thin nature of the dermis.

Additionally, given the nature of the target tissue being more sensitive, and the number of injections required, it is believed that injection site pain is a major cause for the lack of compliance.

Thus, we believe a topical application regimen, capable of penetrating the stratum corneum to deliver botulinum toxin into the dermis, may be able to exhibit similar efficacy with greater compliance and adoption.

In a Phase 1b POC study of DMT410 for the treatment of axillary hyperhidrosis, we saw a greater than 50% decrease in axillary sweat production in 80% of patients at week four.

This result supports our belief that topical application of botulinum toxin via our Spongilla technology to the dermis could be a viable alternative to intradermal injections.

If approved, DMT410 could eliminate the need for intradermal injections of botulinum toxin.

Therefore, we believe DMT410 could potentially be a favorable treatment option for patients suffering with primary axillary hyperhidrosis.

Additionally, we also believe that DMT410 may be an effective treatment for palmar or plantar hyperhidrosis due to DMT410’s delivery of botulinum toxin to the dermis without the risk of distance spread of toxin to the muscle as with intradermal injections of botulinum toxin.

DMT410 could limit the side effects seen with intradermal injections including hand weakness and administration pain.

There can be no assurance that DMT410 will receive FDA approval for hyperhidrosis.

DMT410 for the Treatment of Aesthetic Conditions In addition to the use of DMT410 in the treatment of hyperhidrosis and other medical dermatology conditions such as acne, based on the data from our recent Phase 1b POC trial of DMT410 for the treatment of multiple aesthetic skin conditions such as pore size, sebum production, fine lines, luminosity, and brightness of the skin, we believe DMT410 has an opportunity to be used for the treatment of multiple aesthetic skin conditions.

Botulinum toxin is known to treat a variety of aesthetic skin conditions, but to achieve these positive effects, the botulinum toxin needs to be delivered to the dermis rather than the muscle to have the desired effect.

DMT410’s uniquely sized spicules create microchannels through the stratum corneum and into the dermis that are large enough for botulinum toxin to be delivered to the dermis.

However, the spicules are not long enough to reach the muscle layer, which limits the potential distant spread of toxin and potential side effects.

Botulinum toxin acts by blocking the release of acetylcholine into the synaptic cleft, where it binds to a cholinergic receptor, thereby inhibiting sympathetic nerve function.

This ability to inhibit cholinergic transmission makes it useful to treat indications with glandular hypersecretion, like sebum production or hyperhidrosis, which are partly caused by hyperactive sympathetic nerves.

For aesthetic indications, since botulinum toxin must be delivered to the dermis, intradermal injections are typically required but can require numerous injections in order to cover the larger surface area to treat these aesthetic skin conditions as compared to targeted injections to the muscle.

Intradermal injections can also be difficult to effectively administer and may be painful for patients.

This tends to lead to poor adoption of this therapy, which is why we believe there are currently no approved aesthetic indications utilizing intradermal injections.

Additionally, no topical formulations of a botulinum toxin have been approved, likely due to the size of the molecule and its difficulty in penetrating the stratum corneum to reach the dermis.

Therefore, with no currently approved intradermal injections or topical applications methods of botulinum toxin for aesthetic skin conditions, we believe there is a large market opportunity for a product that can successfully deliver botulinum toxin by topical application into the dermis to improve a patient’s aesthetic appearance.

If approved, we believe DMT410 can address this market.

Limitations of Standards of Care While injections of botulinum toxin into the muscles have been approved for many years for aesthetic treatments such as the reduction of glabellar, lateral canthal or forehead lines, there are many other aesthetic skin conditions, such as enlarged pore size, excess sebum production, fine lines, decreased luminosity, and decreased brightness that botulinum toxin has been demonstrated to improve but a botulinum toxin product, whether via intradermal injections or topical application, has yet to be approved for these indications.

This may be because these aesthetic indications typically require botulinum toxin to be delivered to the dermis rather than the muscle, which due to the thin nature of the dermis, can be more difficult than injecting into the muscle.

Additionally, the areas of the face requiring intradermal injections are much more sensitive and thus can be more painful for patients.

These intradermal aesthetic indications typically require a wider dispersion of botulinum toxin to be delivered to the dermis rather than the few injections into the muscle needed for the deeper facial lines.

Some intradermal studies have required 25-30 intradermal injections in the face to deliver sufficient quantities of botulinum toxin to the dermis.

With some patients having a fear of needles, a treatment that can avoid the use of needles would be desirable for this population.

Additionally, topical application of botulinum toxin has been difficult due to the size of the molecule making it difficult for the botulinum toxin to penetrate the stratum corneum, resulting in many topical applications being ineffective and discontinued.

An example is Revance’s RT001 product which did not achieve the primary or other secondary endpoints in a Phase 3 trial for the treatment of crow’s feet and therefore, Revance does not plan to continue development of this program at this time.

Another botulinum toxin company, Allergan (now part of AbbVie), purchased a company in 2016 to pursue development of a topical botulinum toxin program.

However, we believe Allergan has not conducted any studies with this program.

We believe most botulinum toxin companies remain interested in developing a topical means of administering botulinum toxin that is less painful, easy to apply, provides wider coverage of toxin, and limits potential distant spread of toxin, but no product has yet been successfully developed.

Our Solution for the Treatment of Aesthetic Skin Conditions We believe a product candidate like DMT410, which may be able to successfully deliver botulinum toxin to the dermis covering a larger facial area than injections, would provide a new treatment option for a variety of aesthetic skin conditions, such as reduction in pore size, sebum production, and fine lines, and improvement in skin luminosity and brightness, thus potentially expanding the market for uses of botulinum toxin beyond injections into the muscle for treatment of deep lines.

We believe DMT410 may be able to provide patients with a topical treatment option without the pain and discomfort typically associated with injections of botulinum toxin.

Additionally, we believe administration will be easier and less time consuming for dermatologist, making it an additional value driven treatment option they can offer.

While current botulinum toxins are approved for injections into the facial muscles to treat deeper wrinkles such as glabellar lines, lateral canthal lines and forehead lines, there remain many other aesthetic conditions of the face which could greatly benefit from an intradermal administration of botulinum toxin, especially via topical application.

Certain aesthetic indications such as reduction in fine lines, pore size, and sebum production, and improvement in luminosity and brightness are typically not treated with injections into the muscles but need botulinum toxin to be delivered to the dermis to have the proper effect.

With DMT410’s uniquely sized spicules, we believe it can create numerous microchannels into the dermis allowing a pathway for the topical application of botulinum toxin.

Once in the dermis botulinum toxin is able to act on reducing sebum production which in turn may reduce pore size and overall oiliness of the skin.

Additionally, botulinum toxin has been demonstrated to have a beneficial effect on the mean volume and depth of facial lines giving the skin a smoother appearance.

Therefore, we believe there may be a need for a product, such as DMT410, that can facilitate the topical application of botulinum toxin into the dermis, to treat a variety of these aesthetic skin conditions.

If approved, we believe DMT410 has the potential to expand the market for botulinum toxins’ treatment to multiple additional aesthetic skin conditions.

We believe DMT410 can be an effective product at delivering bioactive botulinum toxin with a topical application for treatment of pore size, sebum production, fine lines, luminosity, brightness, overall aesthetic appearance and possibly more.

We recently completed a Phase 1b POC trial of DMT410 for the treatment of multiple aesthetic skin conditions where we examined improvements in pore size, sebum product, luminosity, brightness, and Global Aesthetic improvement after one treatment of DMT410.

We believe this POC trial produced data which demonstrated that DMT410 was able to deliver botulinum toxin to the dermis and showed a reduction in pore size, reduce sebum production, improved luminosity, improved brightness, and improved the patients’ Global Aesthetics.

This study also produced no adverse events and provided acceptable tolerability data with only mild tolerability effects seen fifteen (15) minutes post treatment.

We believe this data warrants further development of this program and we are currently seeking a partner who has a botulinum toxin they are looking to develop for aesthetic skin conditions which require delivery of botulinum toxin to the dermis.

There can be no assurance that DMT410 will receive FDA approval for any aesthetic indication or that we will be able to find a partner for development.

Clinical Progress of our Lead Product Candidates

XYNGARI™ Phase 3 Clinical Trial Program for Acne

In December 2023, we initiated the XYNGARI™ Phase 3 clinical program entitled Spongilla Treatment of Acne Research study (STAR).

The XYNGARI™ Phase 3 clinical program will include two Phase 3 clinical trials to evaluate the efficacy, safety, and tolerability of XYNGARI™ in patients with moderate-to-severe facial acne.

Each Phase 3 trial will be randomized (2:1), double-blind, placebo-controlled, and will enroll approximately 500-600 patients with moderate-to-severe acne, ages 9 years and older in the United States and Latin America.

The primary endpoints are the mean change from baseline in inflammatory and noninflammatory lesion counts and the Investigator Global Assessment (IGA) treatment response rate.

IGA is measured on a 5-point scale (0-4), with a treatment response defined as at least a 2-point improvement from baseline and an IGA score of 0 (clear) or 1 (almost clear).

Patients will be treated once a week for 12 weeks with either XYNGARI™ or placebo and will be evaluated monthly.

STAR-1 is the first of two pivotal Phase 3 trials, with top-line results expected in March of 2025.

Upon adequate financing, we intend to initiate the second Phase 3 clinical trial, STAR-2, which we expect will be followed by a long-term extension study as required by FDA.

If positive, the results from the Phase 3 program will be used to support the filing of an NDA with FDA.

XYNGARI™ Phase 2b Clinical Results for Acne

In June 2020, we received results from our randomized, double-blind, placebo-controlled, Phase 2b clinical trial of once weekly treatments for twelve weeks of XYNGARI™ for acne.

We enrolled 181 moderate-to-severe acne patients at fourteen (14) sites across the U.S.

Patients were required to be 12 years of age or older, have at least twenty (20) non-inflammatory lesions, twenty (20) inflammatory lesions, no more than two (2) nodules or cysts and be a moderate or severe (meaning a 3 or 4) on the IGA scale of acne.

The IGA scale consists of a 5-point scale, 0-4, with 0 being clear, 1 being almost clear and 4 being severe acne as graded by the treating physician.

Patients were randomly divided into two treatment groups, either to receive XYNGARI™ or placebo.

Patients were required to apply the product, whether XYNGARI™ or placebo, to the entire face, once weekly for 12 weeks with the first two weeks of treatment applied in office under the supervision of trained study staff, then the remaining 10 weekly treatments were applied at home by the patient.

The primary clinical endpoints of the trial included the absolute reduction in inflammatory lesions from baseline.

The secondary clinical endpoints included:

the absolute reduction in non-inflammatory lesions from baseline;

the IGA with a responder being a patient with a 2-grade change in IGA scale and being a 0 or 1 at study exit;

safety and tolerability.

All statistical analyses and data shown for our Phase 2b study are on the intent-to-treat, or ITT, population.

The ITT population included all randomized subjects in the group to which they were randomized, regardless of study drug received or if they completed the study.

The ITT approach provides an unbiased comparison among the treatment groups.

The trial was completed in June 2020 and showed a statistically significant and we believe, a clinically meaningful effect for all efficacy endpoints of the trial, namely reduction in inflammatory and non-inflammatory lesions and IGA responders.

Notably, the treatment effect for all efficacy endpoints was statistically significant at the four-week mark, after only four treatments, and continued to be statistically significant for week eight and week 12 when compared with placebo.

Patients saw a rapid and sustained therapeutics treatment effect in percentage change in inflammatory lesions with a 45% reduction in inflammatory lesions at week four and reached 62% reduction in inflammatory lesions at week 12 compared to 24% and 42% reduction of inflammatory lesions for placebo at weeks four and 12, respectively.

The effect on non-inflammatory lesions were also statistically significant after four weeks, with the therapeutic effect of an approximately 36% reduction in non-inflammatory lesions at week four reaching a therapeutic effect of 58% at 12 weeks, which was statistically significant when compared with placebo.

In addition, both inflammatory and non-inflammatory percent reduction in lesion counts had P-values of less than 0.001 at week four and week 12 when compared to placebo.

We also saw an early statistically significant separation in IGA with 15% of patients in the XYNGARI™ group considered responders on the IGA scale, or who had an IGA score of 0, “clear,” or 1, “almost clear,” after only 4 treatments as compared with just over 2% of patients on placebo.

This statistical separation continued for the remainder of the trial where at the completion of the trial, or week 12, 44% of patients in the XYNGARI™ group, compared with 17% in the placebo group were IGA responders.

This difference was statistically significant with a P-value of less than 0.001.

No reported drug-related severe adverse events were reported in the trial.

The drug also appeared to be tolerable by a majority of patients with greater than 92% of patients experiencing no or mild tolerability with no severe dryness, scaling, erythema, or burning/stinging reported at week 12.

Of those patients who did report tolerability issues, they also reported that the issues were usually transient and resolved quickly without intervention.

Based on this data, after holding an End of Phase 2 Meeting with FDA, we initiated the Phase 3 program in moderate-to-severe acne with the same clinical endpoints and the same formulation of XYNGARI™.

The following diagrams and tables show the absolute reduction of inflammatory and non-inflammatory lesions from baseline until the end of study, or week 12, for both XYNGARI™ and placebo (Image 5), and percent reduction of inflammatory and non-inflammatory lesions from baseline until end of study, or week 12, for both XYNGARI™ and Placebo (Image 6).

Although reduction in non-inflammatory lesions was a secondary endpoint of this trial, it is a required metric for the Phase 3 acne studies necessary for FDA approval.

Mean reduction of inflammatory and non-inflammatory lesions from baseline until end of study, or week 12, for both XYNGARI™ and Placebo

Percent reduction of inflammatory and non-inflammatory lesions from baseline until end of study, or week 12, for both XYNGARI™ and Placebo

Investigator Global Assessment response rate at Day 29, or week 4, Day 57, or week 8 and Day 85, or week 12

As used in the diagrams and table above, the reference to “P-value” (relative to placebo) means the probability of being wrong when asserting that a true difference exists between the results for the relevant patient group and the placebo group.

For example, a “P-value” of less than 0.001 indicates that there is a less than one in 10,000 chance that the observed result in the treatment group and the observed result in the placebo group are the same.

A “P-value” equal to or less than 0.05 means that a given difference is statistically significant.

“Success” is defined as an IGA score of “clear” or “almost clear” and a 2-grade change in IGA upon completion of the study.

Additionally, the safety and tolerability profile of XYNGARI™ appeared to be acceptable with a small number of patients experiencing treatment emergent adverse events as seen in Image 8 below.

In this Phase 2b trial, no subject receiving treatment with XYNGARI™ experienced a severe local skin reaction at study end nor did any patient undergo a dose modification.

Most tolerability issues were mild and resolved shortly after application without any rescue medication as seen in Image 8 below.

Overall, XYNGARI™ was generally safe and well tolerated by patients when applied once weekly for 12 weeks.

System Organ Class Preferred Team

XYNGARI™ (N=91)

General disorders and administration site conditions

Application site erythema

Application site pruritus

Application site dryness

Application site exfoliation

Treatment Emergent Adverse Events

Local Tolerability

XYNGARI™ Phase 2a Clinical Results for Acne

In 2018 we conducted the first clinical trial of XYNGARI™, a randomized, double-blind, 2x2 factorial, placebo-controlled, Phase 2a clinical trial of XYNGARI™ for the treatment of acne.

We enrolled 121 patients to evaluate the tolerability, safety, and efficacy of DM XYNGARI™ T310 mixed with 3% H 2 O 2 following 12 weeks of topical administration in male and female patients with moderate-to-severe facial acne.

The study employed a 2x2 factorial design to assess the contribution of each component of the investigational product (i.e., Spongilla lacustris topical powder and 3% H 2 O 2 USP).

This Phase 2a clinical trial employed the same clinical endpoints as our Phase 2b clinical trial of XYNGARI™ for the treatment of acne, as discussed above.

Patients were randomly divided into one of four treatment groups, XYNGARI™ + 3% H 2 O 2 , XYNGARI™ + Water, Placebo + 3% H 2 O 2 , or Placebo + Water (control).

The patients were required to apply the assigned study drug to their entire face up to once weekly for 12 weeks (84 days), beginning on Day 1 and through Day 78 (as applicable).

During study center visits on Days 29 and 57, a determination was made for each patient, based on the Investigator’s Global Assessment (IGA) score, as to whether study drug application would continue once weekly or at a lower biweekly frequency (once every 2 weeks).

Specifically, patients with an IGA > 1 at the Day 29 or Day 57 visits continued with once weekly study drug applications, while patients with an IGA 1 at these same visits were instructed to subsequently apply their assigned study drug biweekly (see Image 10 below for a presentation of the study drug application frequency algorithm).

Application Frequency Algorithm by Study Visit

This Phase 2a trial showed statistically significant and clinically meaningful effects for its endpoint, absolute reduction in inflammatory lesions when comparing XYNGARI™ + 3% H 2 O 2 and placebo + water (control) groups at both week 8 and week 12 or end of study.

At week 12, XYNGARI™ + 3% H 2 O 2 had a 16-lesion reduction from baseline while placebo + water had an 11 lesion reduction from baseline, with a p-value of less than 0.05.

Across all the treatment groups, there was a mean decrease from baseline (i.e., improvement) in the inflammatory and non-inflammatory lesion counts at Days 15, 29, 57, and 85.

However, there were no statistically significant differences between the XYNGARI™ + 3% H 2 O 2 group versus the placebo + water (control) group for the mean changes from baseline in non-inflammatory lesion counts.

We did not observe a statistically significant difference between the XYNGARI™ + 3% H 2 O 2 group and the placebo + water (control) group in the percentages of patients with IGA treatment success (IGA score of 1 or 0 and a 2-grade change) or patients with 1-grade or 2-grade improvements from baseline in IGA at any visit.

At Day 85 in the XYNGARI™ + 3% H 2 O 2 , XYNGARI™ + water, placebo + 3% H 2 O 2 , and placebo + water groups, 29.6%, 20.0%, 27.6%, and 34.5% of patients had IGA treatment responders, respectively;

66.7%, 66.7%, 65.5%, and 55.2% of subjects had a 1-grade improvement from baseline in the IGA, respectively;

and 37.0%, 20.0%, 27.6%, and 34.5% of subjects had a 2-grade improvement from baseline in the IGA, respectively.

Analysis of Placebo :

After speaking with the clinical investigators in the trial, it was determined that the higher than normal placebo response in non-inflammatory lesions may have been partially due to the stickiness of the placebo, which required patient to scrub their face, resulting in exfoliation of the skin and removal of sebaceous plugs (whiteheads and blackheads), thereby reducing non-inflammatory lesion counts.

We believe this caused a placebo response rate that was much higher than the placebo response rates seen in other topical Phase 2 acne trials.

As a result of the inadequate placebo, we developed a new proprietary placebo formulation for our Phase 2b clinical trial.

Once weekly vs.

Biweekly Treatment Schedule :

Due to this being the first time XYNGARI™ was studied in moderate-to-severe acne patients for 12 weeks, a conservative study design was chosen to ensure patient tolerability and safety while attempting to maintain efficacy.

Therefore, we allowed IGA treatment responders (IGA score of 0 or 1) to move to a biweekly or every other week application schedule as discussed above.

This resulted in 3 out of 27 patients in the XYNGARI™ + 3% H 2 O 2 group and 0 out of 29 patients in the placebo + water group moving from an IGA score of 1 (treatment responder) at week 8 and regressing to an IGA score of 2 (treatment failure) at week 12.

Therefore, our Phase 2b clinical trial of XYNGARI™ in moderate-to-severe acne patients incorporated only once weekly applications for 12 weeks with no biweekly option.

No statistical or clinical difference was seen between the placebo + 3% H 2 O 2 and the placebo + water groups, which we believe indicates that 3% H 2 O 2 by itself does not have a treatment effect.

XYNGARI™ next steps for acne

After receiving positive feedback and alignment with FDA from our End of Phase 2 meeting in June of 2023 we began enrolling patients in our XYNGARI™ Phase 3 STAR-1 clinical trial in moderate-to-severe acne in December 2023.

The XYNGARI™ Phase 3 program will include two, multi-center, placebo-controlled trials with identical clinical endpoints as our recent successful Phase 2b clinical trial of XYNGARI™ for the treatment of moderate-to-severe acne, followed by a long-term extension study.

Once we receive results from the Phase 3 program, assuming positive results, we plan to file an NDA with the FDA shortly thereafter.

This Phase 3 program is intended to be designed to demonstrate the safety and efficacy of the treatment of XYNGARI™ relative to placebo for the treatment of moderate-to-severe acne.

Prior to, or in parallel with our planned Phase 3 program, we intend to continue conducting and complete the additional non-clinical studies necessary to support the filing of an NDA.

If XYNGARI™ is approved for the treatment of acne, we believe XYNGARI™ can eventually be an attractive prescription to over-the-counter switch, or Rx-to-OTC, target, which could provide a substantially larger sales opportunity.

There can be no assurance that XYNGARI™ will receive FDA approval for the treatment of acne.

XYNGARI™ Phase 1a Clinical Results for Psoriasis

We completed a Phase 1a POC trial of XYNGARI™ for the treatment of mild-to-moderate psoriasis.

This was an open-label, multi-center, 12-week study in 30 mild-to-moderate psoriasis patients with psoriatic lesions covering between 2-30% of body surface area.

The trial aimed at evaluating the tolerability, safety, and efficacy of once weekly treatments of XYNGARI™, which consists of 2 grams of Spongilla powder mixed with 6 mL of 3% H 2 O 2 .

One mild or moderate lesion was selected, and patients were required to apply XYNGARI™ to the entire lesion, once weekly for 12 weeks with the first two weeks of treatment applied in office under the supervision of trained staff, then the remaining 10 weekly treatments were applied at home by the patient.

The endpoints in this study included:

Physicians Global Assessment (PGA) of disease severity with success defined as absent or very mild disease, a score of 0 or 1 respectively on a 5-point scale, at the target lesion site.

Psoriasis Area Severity Index (PASI) at the target lesion site defined as absent or mild, a score of 0 or 1 respectively, on a 6-point scale.

This required each psoriatic sign of scaling, erythema, and plaque elevation to have a score of 0 or 1 for the subject to be considered a responder.

Pruritus Visual Analog Scale (VAS) looking at the mean change and percent change from baseline in pruritis (itch).

All efficacy analyses were performed using the As-Treated population, which consists of all enrolled patients who received at least one dose of study medication and the per protocol population, which consists of all enrolled patients with no significant protocol violations during the study that would affect the efficacy analyses.

The trial was completed in August 2021 and showed an acceptable safety and tolerability profile that we believe is clinically meaningful and warrants further investigation of XYNGARI™ as a potential treatment for mild-to-moderate psoriasis.

XYNGARI™ was able to achieve a PGA score of 0 or 1 for the target lesion in 29.6% of patients at week 8.

XYNGARI™ also demonstrated a total PASI score of 0 or 1 for the target lesion in 25.9% of patients at week 8.

Notably, XYNGARI™ demonstrated a 19.6% reduction from baseline in pruritus (itch) at week 8 with a peek reduction of 22.5%.

We believe these findings from a POC trial are encouraging for the potential use of XYNGARI™ as an easy to apply topical treatment for mild-to-moderate psoriasis with an acceptable safety and tolerability profile.

No reported drug-related severe adverse events were reported in the trial and only two treatment emergent adverse events were reported, both being application site pruritus.

Additionally, the drug also appeared to be tolerated by a majority of patients.

Of those patients who did report tolerability issues, they also reported that the issues were usually transient and resolved quickly without intervention.

XYNGARI™ next steps for psoriasis

We are pleased with data already seen in our Phase 1 POC trial, especially seeing a reduction in itch as that is one of the main complaints of patients suffering from psoriasis.

We are in the process of designing a Phase 2 study of XYNGARI™ for the treatment of psoriasis.

The Phase 2 study will be a larger randomized, double-blind, placebo control study of XYNGARI™ for the treatment of psoriasis.

Based on the data from the Phase 1b proof of concept study we are considering adding additional arms to examine once versus twice weekly treatment, potentially enhancing the treatment effect seen in our Phase 1b trial.

Additionally, due to the unique nature of psoriasis and the general thickness of psoriatic plaques, we may also examine increasing the application pressure and the length of application.

We believe that the thicker psoriatic plaques may require a more intensive treatment compared to the application regimen for acne where there is no thickened skin.

We believe XYNGARI™ could be a first in class treatment option for psoriasis patients.

The XYNGARI™ program for psoriasis is currently on hold with further advancement subject to obtaining additional financing and/or a strategic partner.

There can be no assurance that XYNGARI™ will receive FDA approval for the treatment of psoriasis.

DMT410 Phase 1b-Primary Axillary Hyperhidrosis

In the first quarter of 2019, we completed a Phase 1b, open-label, POC trial of DMT410 for the treatment of moderate-to-severe primary axillary hyperhidrosis.

In this study we treated ten (10) patients with one application of our proprietary sponge powder followed by one topical application of BOTOX, reconstituted per label, to each axilla.

Patients were followed for 4 weeks after which time their sweat production was measured and compared with baseline measurements.

The endpoints for this trial included:

percent of patients with less than 50% reduction in gravimetrically measured sweat production from baseline,

percent of patients with gravimetric sweat production of greater than 50 mg, and

percentage change in gravimetric sweat production.

After 4 weeks, 80% of patients saw a decrease in gravimetric sweat production greater than 50%, 85% of patients had gravimetric sweat production of less than 50mg, and patients had a 75% decrease in gravimetric sweat product from baseline.

Based on this clinical data, we believe that we were able to deliver botulinum toxin into the dermis through topical application for the treatment of primary axillary hyperhidrosis.

Treatment with DMT410 also had an acceptable safety and tolerability profile.

On January 17, 2025, we entered into the Clinical Trial Agreement with Revance Therapeutics, Inc.

(Revance), who recently merged with Crown Laboratories, pursuant to which we in collaboration with Revance intend to conduct a multi-center clinical trial to evaluate the topical application of XYNGARI™, with DAXXIFY®.

The Revance Trial is anticipated to be randomized (1:1:1:1), double-blind, placebo-controlled, and intends to enroll approximately 48 patients across sites in the United States.

Patients are anticipated to be evaluated at four regular intervals.

Under the Clinical Trial Agreement, we and Revance will form a joint development committee to facilitate communications between the parties related to the Revance Trial.

If successful, we plan to explore a broader partnership with Revance to study DMT410 in additional indications.

There can be no assurances that DMT410 will receive FDA approval for the treatment of hyperhidrosis.

DMT410 Phase 1b— Aesthetic Conditions

In November 2020, we enrolled our first patient in a Phase 1b open-label, POC trial of DMT410 for the treatment of upper facial lines along with multiple other aesthetic skin conditions that are affected by delivery of toxin to the dermis such as pore size, sebum production, brightness, luminosity, fine lines, and Global Aesthetic Improvement.

Due to the fact that we do not own rights to a botulinum toxin product, we were required by the FDA to conduct this trial using an approved indication for BOTOX, upper facial lines, an approved dose for this indication (64 units of botulinum toxin) and an approved route of administration, which is typically injections into the muscle rather than the dermis.

However, our primary interest was studying the clinical effect of DMT410 for the aesthetic skin conditions that require delivery of botulinum toxin to the dermis rather than the muscle.

This is due to our belief that DMT410 only delivers botulinum toxin to the dermis and not the muscle, thus limiting the botulinum toxin’s effect to aesthetic conditions which arise in the dermis like fine lines, pore size, sebum production, and others.

With these constraints, we initiated the POC trial by enrolling ten (10) female patients, age 18 or older, each receiving one treatment of DMT410, consisting of one topical application of our proprietary sponge powder followed by one topical application for BOTOX, reconstituted per label, to the upper face.

Patients were followed for sixteen (16) weeks to determine the achievement of our endpoints along with the duration of effect.

We also collected safety and tolerability data.

We received top-line data from this study in the November 2021, and believe that we achieved results in multiple aesthetic endpoints sufficient to warrant further investigation of DM410 for the treatment of various aesthetic skin conditions.

The endpoints for this trial were:

Portion of patients achieving a grade of none or mild on the investigator’s assessment of lateral canthal, forehead, and glabellar lines based on the Facial Wrinkle Scale (FWS), which consists of a 5-point scale with 0 being none and 1 being almost none.

To be considered a responder, both the patient and physician had to agree on the score.

Portion of patients achieving improvement on the physician’s assessment of pore size improvement, based on the Global Aesthetic Improvement Scale (GAIS), which consists of a 5-point scale with 0 being no improvement, 1 being less than or equal to 25% improvement, 2 being a 26-50% improvement, 3 being a 51-75% improvement, and 4 being a 76-100% improvement.

Mean and percent change from baseline in brightness based on the 10-point visual analog scale.

Mean and percent change from baseline in luminosity based on the 10-point visual analog scale.

Portion of patients achieving a two- grade improvement on the physician’s assessment of FWS of fine lines under the eye.

The efficacy analysis was conducted on the ITT and Per Protocol (PP), meaning all patients completing the study without a major protocol violation, populations.

In addition to the physician measured endpoints listed above, we also implemented 2-dimensional VISIA and 3-dimensional PRIMOS imaging technology from Canfield Scientific to provide objective analysis of many of the aesthetic endpoints.

Based on the assessment of forehead, lateral canthal, and glabellar lines, no patient was considered a responder in this study, while some patients did achieve at least a one-grade change throughout the course of the study.

This result was not unexpected as BOTOX is only approved for injections into the muscle for these indications and we did not believe that we would see any potential distant spread of toxin outside of the dermis to the muscle.

Seeing no potential distant spread of toxin was encouraging for us as it provides important safety data that while DMT410 can be applied over a larger treatment area than injections, it does not appear to travel beyond the dermis which may cause unwanted facial effects.

We believe the real potential of DMT410 lies in the aesthetic endpoints that can be affected by delivering BOTOX to the dermis rather than the muscles.

These clinical endpoints include pore size, global aesthetic improvement, brightness, luminosity, and fine lines.

The following table (Image 11) shows the improvements in pore size, or a decrease in overall pore size, with patients achieving at least a 25% improvement in pore size, for assessment of GAI, or the overall improvement in skin quality, the with patients achieving at least a 25% improvement in GAI, for assessment of brightness, or the skin’s combined uniformity of color and texture, with patients having at least a 1-point improvement in brightness, and for assessment of luminosity, or the intensity of light area reflected off the face, with patients having at least a 1-point improvement in brightness.

Aesthetic Endpoints

In addition to the physician measured endpoints, we also utilized Canfield Scientific’s 2-dimensional VISIA and 3-dimensional PRIMOS imaging technologies to gather additional objective data on some of the key endpoints.

Based on the VISIA system patients saw a 14.1% reduction in pore count and a 14.3% reduction in pore area at week 4.

Patients also saw a 16.5% reduction in wrinkle count and a 11.5% reduction in wrinkle area at week 4.

Using the PRIMOS image analysis patients saw a percent decrease in mean line, which consist of the deeper facial lines, of 12.1% and a percent change in mean roughness, which consists of the superficial fine lines, of 6.5%.

We believe the subjective effects seen by the treating physicians were further validated by the objective measures using Canfield camera systems.

No reported drug-related adverse events were reported in the trial.

The drug appeared to be well tolerated by patients, with only mild stinging and erythema reported 15 minutes after treatment and no tolerability issues reported at week 4, 8, 12 or 16.

DMT410 next steps for aesthetics

We are very encouraged by the results from our Phase 1b POC trial of DMT410 for the treatment of multiple aesthetic skin conditions.

This was designed to be a signal detection trial of DMT410 for the treatment of a variety of aesthetic skin conditions based on the clinical trial design constraints, including the limitation on the quantity of BOTOX that we were able to apply, the clinical endpoints that needed to be included, and the area of the face that could be treated.

Even with these limitations we believe that we achieved results sufficient to warrant the continued development of this program as there remains no approved botulinum toxin, whether via injection or topical, to treat many of the endpoints in which we saw a treatment effect.

We believe this is further supported by the fact that many of the endpoints saw an improvement by week eight (8) or twelve (12) and started to return towards baseline at week 16.

This is consistent with the knowledge that BOTOX lasts for about three (3) months before the effect begins to fade.

We believe that if we can conduct a larger Phase 2 clinical trial that consists of multiple doses of botulinum toxin, we will be able to find the optimal dose for the treatment of a variety of aesthetic skin conditions including pore size, sebum production, fine lines, luminosity, brightness, and overall aesthetic improvement.

We know that botulinum toxin has shown efficacy of these endpoints but there has been very little research conducted on the optimal dose or administration procedure, likely due to challenges with intradermal injections and the lack of topical applications that can effectively deliver botulinum toxin to a large enough treatment area as required to treat many of these aesthetic skin conditions.

We believe DMT410 can meet this need as shown by our Phase 1b data, so we continue to discuss partnership opportunities with Revance and other botulinum toxin companies that may be interested in helping us further develop our DMT410 program for multiple aesthetic skin conditions.

There can be no assurances that we are able to successfully negotiate a partnership with a botulinum toxin company for aesthetic skin conditions or that DMT410 will receive FDA approval for the treatment of any aesthetic skin conditions.

While current treatment options may be effective for some consumers, there are many limitations and drawbacks of current OTC and Rx acne

products, which cause poor patient compliance and reduced efficacy.

Currently available topical therapies for the treatment of acne must

be applied up to three times a day to allow an accumulation of the active ingredient within the skin to effectively treat the disease.

This requirement to apply once or multiple times per day becomes very onerous and time consuming for consumers, causing many consumers

to fail to comply with the strict application regimen and/or skip multiple treatments.

Proper use and application schedules are particularly

important for topical acne products and poor patient adherence may lead to reduced treatment effect and ultimately discontinuation of

treatment by the patient due to the lack of effect.

In addition to the onerous application schedule,

some current acne products, such as retinoids that must be applied multiple times a day, may cause significant stinging, burning, and

peeling after each application.

These tolerability issues, which may start occurring after the first application, and the substantial

discomfort they cause, lead many consumers to discontinue the necessary daily application schedule or the use of the product altogether.

It is well known that benzoyl peroxide, or BPO, leads to drying of the skin and that retinoids result in many local skin reactions including

erythema, burning, and peeling, after the first treatment.

This has been observed in the combination study of adapalene/BPO, where more

than 20% of the subjects reported moderate or severe erythema and stinging/burning.

Lastly, most topical products have an unavoidable

latency period of 6-8 weeks until consumers have a definite improvement in their acne lesions.

This means they may have to endure 30 to

60 applications before observing that their acne is improving (assuming a daily or twice daily regimen), all while dealing with the burning,

stinging, and peeling that may accompany these topical products.

We believe today’s consumers become impatient with the lack of

rapid perceived effect of available products thus leading to premature discontinuation of treatment.

The lack of rapid treatment effect,

side effects, and onerous application schedules all greatly contribute to patient noncompliance issues and could ultimately lead to treatment

failure for current topical therapies.

We believe consumers are more invested in rapid efficacy outcomes and low side effects than costs,

thus we believe consumers will be more willing to pay for a high value acne treatment, like our Clearing Treatment.

Our Solution for Acne.

We believe our Clearing

Treatment will offer consumers a differentiated treatment option than what is currently available by delivering powerful results without

harmful side effects.

We believe our Clearing Treatment will have an apparent rapid treatment effect, clear acne lesions, and potentially

improve overall skin quality, making our system a fundamental product for any skincare routine.

We are in the final stages of the development

and packaging to create a paradigm shift in how consumers can treat their acne.

We have designed our Clearing Treatment to remedy the

multiple factors of acne while also attempting to increase patient compliance through ease of use and acceptable tolerability profile.

Once launched, we believe our Clearing Treatment

has the potential to remedy many of the negative characteristics associated with current topical therapies for acne, including cumbersome

treatment regimens, negative side effects (including burning, stinging, itching or dryness, which may occur as early as the first treatment

and continue daily thereafter), and delayed time to effectiveness (which may take up to eight weeks).

Our Clearing Treatment system is

designed to have a faster time to treatment than currently available therapies, potentially leading to higher patient compliance.

visible response may encourage consumers to continue to comply with the application schedule, leading to a continued reduction in their

We will recommend a 12-week treatment cycle with our Clearing Treatment or once the patient has cleared their acne, we believe

they can transition over to our Foundational Treatment for continued skin maintenance.

We believe continued maintenance applications

will be important and encouraged for consumers to maintain acne free skin as part of their ongoing skincare routine.

Our Clearing Treatment will be sold as a 4-week

supply, with the option to subscribe to a refill-based subscription at a discounted price.

The Clearing Treatment will contain four weeks

of daily salicylic acid wipes and four weekly Bioneedle treatments that should be applied by the patient as directed.

We believe the daily

wipes are a way to help quickly reduce acne lesions in between the weekly Bioneedle treatment applications.

We believe this combination

can be the foundation for better skin health due to its multifaceted approach of reshaping a person’s skin, with a weekly renewal

of the skin and a daily acne therapy.

We do not believe that consumers have to compromise on their acne treatment and see our Clearing

Treatment as a way to meld ancestral wisdom with scientific innovation to create an entirely new approach to acne.

The Acne Routine

The Bioneedle Treatment .

Once per week,

consumers will complete their Bioneedle treatment, as discussed above, to help reset the appearance of their skin.

The Bioneedle treatment

will help jumpstart their skin’s natural healthy process, which will be followed by daily salicylic acid wipe applications for their

daily fight against acne lesions.

We believe this dual method will help not only treat acne but provide acne consumers with clearer, fresher

looking skin.

As the daily part of their acne

treatment routine, consumers will cleanse their face with the provided wipe.

This wipe is infused with 0.5% salicylic acid solution, a

known active ingredient for treating acne.

Salicylic acid (“SA”) is part of the U.S.

Food and Drug Administration’s

(“FDA”) OTC monograph for the treatment of acne and has been used topically treat various skin diseases for over 2,000 years.

Its origins are traced back to ancient civilizations, where extracts from willow bark were used to treat various skin disorders through

its exfoliation properties.

More recently, SA’s peeling properties have been considered a complementary treatment for the management

of acne, since it causes the controlled and safe removal of superficial lesions followed by regeneration of dermal tissue.

to its promotion of cell turnover, SA is also used for its anti-inflammatory activity, helping to relieve facial erythema associated with

With daily cleansing of their skin with the salicylic acid wipe, consumers will not only be removing dirt and harmful oils but also

beginning the removal of their acne lesions.

The upcoming launch of our Foundational

Treatment and eventual launch of our Clearing Treatment is expected to solidify our presence in the skincare market while reinforcing

our broader strategy of developing category-defining skincare products built around unique ingredient systems and novel usage paradigms.

We plan to initially introduce the kit through targeted channels that emphasize education and regimen-based skincare, with the potential

for broader distribution over time.

While we cannot ensure commercial success, we believe that the differentiated formulations, simplified

routine, and clear consumer messaging will support strong initial adoption and provide a foundation for future line extensions within

the broader skincare market.

Future Tome Skincare Products

In addition to its skin renewal and acne-focused

benefits, we believe the multifaceted Bioneedle technology offers a versatile platform for broader OTC and cosmetic applications by combining

controlled mechanical resurfacing with enhanced topical performance either alone or in combination with other active ingredients.

transient microchannels and increasing surface turnover, we believe the Bioneedle can support improved skin smoothness, radiance, and

texture refinement while helping optimize the delivery and amplifying the performance of well-established skincare active ingredients.

Our Bioneedle technology may be leveraged across a range of formulations, including brightening and tone-correcting products, anti-aging

and firming regimens, skin rejuvenation protocols, in addition to treating serious skin disease.

While we are currently focused on preparing

for the commercial launches of our Foundational Treatment and Clearing Treatment, we continue to research additional skincare

market opportunities.

We aim to find the “white space” in the various subsectors where few to no products currently reside

and where our therapies can enter and quickly establish a strong market presence.

One near-term opportunity is a milder Bioneedle

treatment to help with texture for more sensitive skin types.

It would be positioned for consumers with sensitive skin seeking smoother,

brighter skin without aggressive procedures.

A Bioneedle “polishing” treatment could be paired with brightening and antioxidant

ingredients to help improve dullness, uneven tone, and post-inflammatory discoloration while also visibly refining pores and skin texture.

This concept is well suited for face and body applications, including areas prone to roughness such as the cheeks, jawline, and décolleté,

and can be marketed as a weekly “reset” step in a cosmetic routine.

Unlike other at-home texture products that claim to include

spicules, our product will incorporate a mild version of our sponge matrix that may help retexture the user’s skin through a mild

The intention of this product would be to fill the void of at-home scrubs and overly intense in-office procedures, like chemical

peels or invasive microneedling devices, which can be painful and costly for consumers.

This will be part of our skintech at home where

we believe consumers will feel like they are receiving a luxury therapy, but at a reduced price.

A second highly compelling opportunity is an OTC

topical psoriasis care system designed to help manage the visible symptoms associated with plaque buildup, rough texture, and discomfort.

While the psoriasis category has seen significant innovation in prescription biologics, there are comparatively few differentiated OTC

options that focus on improving scale-related texture and supporting consistent topical performance.

A Bioneedle treatment could be positioned

as an adjunctive, non-prescription solution that helps lift surface buildup, promotes turnover, and enhances the feel and appearance of

affected areas all while being paired with a well-recognized OTC ingredient to amplify symptomatic relief.

This product could create a

compelling bridge between Rx treatments and OTC symptom management, with room for a premium, technology-led offering in an underserved

retail segment.

A third highly strategic opportunity may be a

formulate soap or shampoo for scalp and follicle-support treatment, designed to address dandruff.

The OTC monograph provides for a handful

of active ingredients that are approved for the treatment of dandruff and the improvement of factors that can contribute to flaking, discomfort,

and poor scalp quality.

The Bioneedle can help lift debris and accelerate turnover at the scalp surface while enabling better contact

of soothing and balancing compounds with the skin.

The microchannels of the Bioneedle may also allow the OTC active to better penetrate

the scalp and target treatment to the affected area.

This multi remedy approach may create a strong product story for clarifying scalp

care, oily scalp management, and overall follicular health, with potential extensions into pre-shampoo treatments or leave-on scalp serums.

Together, we believe these opportunities highlight

how the Bioneedle can serve as the foundational ingredient to build a scalable technology platform, supporting multiple product formats

(powders, gels, masks, shampoos, and cleansers), broad consumer needs, and differentiated claims around renewal, texture refinement, and

optimized topical performance.

Collectively, expanding into these additional OTC and cosmetic applications would reinforce our identity

as a science-driven skincare innovator by showcasing a scalable technology platform that can be adapted across multiple indications, skin

types, and consumer needs.

By leveraging the same clinically informed principles, optimized topical performance, and skin-supportive active

pairing, these products would demonstrate consistent scientific rigor while building a cohesive portfolio narrative.

This approach not

only strengthens credibility with dermatology-minded consumers but also positions us as a leader in advanced, mechanism-based skincare

solutions that bridge the gap between cosmetic improvement and therapeutic support.

Bioneedle Delivery System (“BDS”)

BDS is our topical treatment regimen that utilizes

our unique Bioneedle to facilitate the intradermal delivery of macromolecules, such as botulinum toxin or dermal fillers, through topical

application by a professional rather than with injections.

These macromolecules are highly effective and approved for the treatment of

multiple aesthetic skin conditions, but must be injected by a professional, either intramuscularly or intradermally, sometimes requiring

numerous injections, which can be painful.

We believe that our BDS may provide professionals and consumers with a topical treatment option

for skin conditions that previously were hard to treat through topical therapy.

BDS works by first topically applying our proprietary

sponge powder to the treatment area wherein the mechanical Bioneedles penetrate the skin, thereby creating millions of microchannels into

the dermis similar to the Image 4 below.

These newly created microchannels allow for the application of other molecules that benefit the

skin by reaching the dermis.

Bioneedle Microchannels

We believe our BDS may provide advantages

over other microneedling devices like a derma roller, microneedle pens, or microneedle patches.

Most of these microneedling devices

are manufactured, leading to certain limitations on size or array of the microneedle.

Our Bioneedle is wildly harvested and based on

certain environmental conditions for harvest we can obtain what we have found to be the optimal features for our Bioneedle.

processing we are able to precisely size our sponge matrix to ensure the organic and inorganic components meet the needs for our

We believe the precise size of our Bioneedles are small enough to be less painful than most derma rollers or microneedling

devices, while still creating microchannels sufficient for delivery of macromolecules into the dermis.

Additionally, our Bioneedles

are free-floating in our matrix, rather than attached to a device, which we believe provides skincare professionals a distinct

advantage to add more personalization for consumers.

Skincare professionals can apply our Bioneedles to as small or as large of a

surface area as they deem necessary in a uniform manner based on their desired outcome.

Then, once applied, our Bioneedles stay in

the skin for a short period of time, allowing the newly created microchannel to remain open rather than close up.

With the open

microchannel, a macromolecule, like botulinum toxin, can be applied topically to the same area to drive the macromolecule through

the microchannel and into the dermis where it can have its intended effect.

We also know that there are millions of spicules within

our sponge matrix, allowing for the creation of a large number of microchannels as seen in Image 4 above, with each purple dot

indicating the penetration of a spicule.

We believe these distinct attributes will entice

skincare professionals, like aestheticians and dermatologists, to use our BDS and seek out new and unique ways to deliver a variety of

macromolecules.

Based on published data of spicules being used to deliver botulinum toxin we believe our BDS can be used with a variety

of macromolecules in many aesthetic and medical skincare applications.

These might include delivering botulinum toxin to reduce pore size

or for the treatment of hyperhidrosis.

Additionally, BDS could help deliver dermal fillers for a more uniform field effect, which we see

as difficult to achieve with intradermal injections or currently available microneedling techniques.

On January 17, 2025, we entered into a Clinical

Trial Collaboration Agreement (the “Collaboration Agreement”) with Revance Therapeutics, Inc.

(“Revance”) where

we intended to conduct a Phase 2a clinical trial to evaluate the topical application of our Bioneedle followed by the topical application

of Revance’s botulinum toxin product, DAXXIFY® for the treatment of primary axillary hyperhidrosis.

In light of our recent strategic

shift to develop and distribute skincare products, we plan to continue to discuss future opportunities for this collaboration with Revance.

At this time, the initiation of the Phase 2a clinical trial has been placed on hold.

We still believe there is a potential to utilize

our Bioneedle for the topical delivery of botulinum toxin, but with our strategic decision to withdraw the XYNGARI™ investigational

new drug application (“IND”), we are currently evaluating the regulatory and commercial opportunities for this program.

the initiation of the Phase 2a clinical study is on hold, we continue to evaluate alternative ways to leverage our Bioneedle as a novel

platform to enhance the topical delivery of large-molecules, like botulinum toxin, as a needle-free alternative to conventional intradermal

injection of large molecules for medical and aesthetic skin conditions.

Manufacturing

We do not currently own or operate any manufacturing facilities and do not plan to own any in the near future.

We have been relying on our third-party partners for the manufacture of our products used in pre-clinical studies and clinical trials and will likely continue to rely on these partners in the near term for the commercial manufacturing of our drug substance and drug product, if our drug product candidates are approved.

Manufacturing of the active pharmaceutical ingredient, or API, for our product candidates requires a raw material that is derived from a natural source.

To date, we have obtained naturally sourced Spongilla raw material directly from our supplier based in Russia.

In February 2020, we signed an exclusive supply agreement with this supplier of Spongilla raw material .

Our supplier has over 22 years of experience collecting and processing Spongilla and has the capacity to collect and process large quantities of Spongilla per year.

We believe our supplier is able to and will continue to be able to harvest sufficient quantities of raw material to fulfill our development and potential commercial needs, if a product candidate is approved using this raw material.

We received multiple shipments of Spongilla raw material from our supplier during fiscal years 2023 and 2024 containing additional quantities of Spongilla raw material, which we believe will provide us with sufficient quantities of Spongilla to initiate and complete the Phase 3 program in moderate-to-severe acne, complete a Phase 2b trial of DMT410 in axillary hyperhidrosis and support the filing of an NDA for XYNGARI™ in acne in the event of successful completion of the two Phase 3 studies.

However, we are exploring alternative manufacturing sources in order to ensure that we have access to sufficient manufacturing capacity to meet potential demand for any of our product candidates in a cost-efficient manner.

See “Business—Material Agreements— Supply Agreement between Dermata Therapeutics LLC and Reka-Farm LLC ” for more information regarding our supply of Spongilla .

Development and commercial quantities of any drug product candidates that we may develop will need to be harvested, manufactured in facilities, and processed in compliance with the requirements of the FDA and the regulatory agencies of other jurisdictions in which we are seeking approval.

We currently employ internal resources to manage our manufacturing contractors.

The relevant manufacturers of our drug product candidates have advised us that they are in compliance with both current Good Laboratory Practices, or cGLP, and cGMP.

We have relied upon our complete supply chain while supporting our Phase 2 and Phase 3 clinical supply requirements and we are confident that our manufacturers have the ability to scale our processes to support our future commercial requirements.

Our suppliers and manufacturers were specifically selected based on the capabilities of their organization, their compliance to regulations, their personnel and the type and capabilities of their equipment.

Testing methods for each stage of the manufacturing process form acquisition of raw materials through production of finished drug product have been developed and satisfactorily qualified per the FDA’s phase appropriate regulations relating to clinical materials for human use.

Analytical methods and operational procedures related to each stage of our production operations including product release will continue to evolve and be validated as part of our overall development plan for Phase 3 clinical supplies and commercial production.

We do not currently own or operate any manufacturing

facilities and do not plan to own any in the near future.

We rely, and will rely, on our third-party partners for the manufacture of our

products for the commercial sale of our skincare products, if our products are launched.

To date, we have obtained wildly harvested Spongilla

raw material directly from our exclusive supplier based in Russia.

In February 2020, we signed an exclusive supply agreement with

this supplier of Spongilla raw material .

Our supplier has over 23 years of experience collecting and processing Spongilla

and has the capacity to collect and process large quantities of Spongilla each year.

We believe our supplier is able to and will

continue to be able to harvest sufficient quantities of raw material to fulfill our development and potential commercial needs.

recently received a shipment of Spongilla raw material from our supplier containing quantities of Spongilla raw material.

We believe this new shipment will provide us with sufficient quantities of Spongilla to launch our first commercial product, the Foundational Treatment in the middle of 2026 and the Clearing Treatment to follow.

We also believe that our supplier will be

able to meet our future supply needs if the sales of our commercial products exceed our forecasted numbers.

Notwithstanding, we continue

to explore alternative manufacturing sources of our sponge raw material in order to ensure that we have access to sufficient supply to

meet potential demand for any of our products in a cost-efficient manner.

While Reka-Farm is the sole supplier of our Spongilla raw materials

used in our products, we have evaluated other suppliers of Spongilla from other regions of the world;

however, no other supplier nor their

Spongilla supply has met the quality standards required by our cGMP practices.

An alternative source to supply Spongilla raw materials

would be the aquaculture of Spongilla in a lab setting, which could significantly increase the cost of raw materials as well as the availability

of raw materials due to the cost and time to build an aquaculture infrastructure to supply Spongilla in commercial quantities.

due to our ability to obtain the Spongilla from Reka-Farm, we remain confident that we will not need to incur these costs for the foreseeable

See “Business—Material Agreements— Supply Agreement between Dermata Therapeutics LLC and Reka-Farm LLC ”

for more information regarding our supply of Spongilla .

We continue to employ strict processes to ensure

the highest quality product, including internal resources to manage our contractors.

The relevant manufacturers of our drug products have

advised us that they are in compliance with both current Good Laboratory Practices (“cGLP”) and cGMP.

We are confident that our manufacturers have the

ability to scale our processes to support our first commercial launch requirements and future commercial requirements.

Our suppliers and

manufacturers were specifically selected based on the capabilities of their organization, their compliance to regulations, their personnel,

and the type and capabilities of their equipment.

Testing methods for each stage of the manufacturing process from acquisition of raw

materials through production of finished product have been developed and satisfactorily qualified per the appropriate regulations.

methods and operational procedures related to each stage of our production operations including product release will continue to evolve

and be validated as part of our overall development plans and commercial production.

Commercialization

Given our stage of development, we do not currently have any internal sales, marketing, or distribution infrastructure or capabilities.

If approved, we intend to commercialize XYNGARI™, or any other product candidates that we may successfully develop, in the United States by building a specialized sales organization focused on dermatologists or partnering with a company that has an already established sales force focused on dermatologists.

We believe a scientifically oriented, customer-focused team of approximately 50-60 sales representatives would allow us to reach our targeted dermatologists in the U.S.

with the highest potential for prescribing XYNGARI™.

In the future, we may develop and commercialize XYNGARI™ for additional geographic regions, independently or with a strategic partner.

If XYNGARI™ is approved, and we are able to successfully commercialize it, we believe XYNGARI™ can eventually become an attractive Rx-to-OTC switch target, which could provide a substantially larger addressable market and an expanded sales opportunity.

The medical and aesthetic pharmaceutical industries in which we plan to operate are competitive and subject to changes in practice.

While we believe that our unique natural technology, knowledge, experience and resources provide us with competitive advantages, we may face competition from many different sources with respect to our current programs or any other product candidates that we may seek to develop or commercialize in the future.

Possible competitors may include pharmaceutical companies, academic and medical institutions, governmental agencies and public and private research institutions.

These prospective competitors have the ability to effectively commercialize, market and promote approved products, including communicating the effectiveness, safety and value of products to actual and prospective customers.

Many of our prospective competitors have substantially greater manufacturing, financial, research and development, personnel, and marketing resources than we do.

Our prospective competitors may also have more experience and expertise in obtaining marketing approvals from the FDA and foreign regulatory authorities.

In addition to product development, testing, approval and promotion, other competitive factors in the pharmaceutical industry include industry consolidation, product quality and price, product technology, reputation, customer service and access to technical information.

As a result, our prospective competitors may be able to develop competing or superior products and compete more aggressively and sustain their competitive advantage over a longer period of time than us.

Our products may be rendered obsolete or may lack economic viability in the face of competition.

The key competitive factors affecting the success of XYNGARI™ , if approved, will likely be its efficacy, safety, convenience of administration and delivery, price, and the availability of reimbursement from government and other third-party payors.

With respect to XYNGARI™ for the treatment of moderate-to-severe acne, if approved, we will primarily be competing with therapies such as other topical products, oral products, in-office procedures, such as laser surgery, off-label drugs, over the counter medication and homeopathic remedies.

With regards to XYNGARI™ for the treatment of mild-to-moderate psoriasis, if approved, we will face competition from topical therapies, oral therapies, systemic therapies, photo therapies and homeopathic treatments.

However, based on our clinical trials, we believe that XYNGARI™ has multiple competitive advantages over current treatment alternatives with significantly less adverse side effects.

Our main competition in these indications will be with products from Sun Pharmaceuticals Industries Ltd., Sol-Gel Technologies Ltd., Arcutis Biotherapeutics, Inc., Almirall S.A., Galderma S.A., Pfizer Inc.

See “ Business – Clinical Progress of our Lead Product Candidates ” for the results of our completed and ongoing clinical trials.

While we are unaware of any potential similar competitive topical products to XYNGARI™ for the treatment of acne and psoriasis, it is possible that such potentially similar competitive products are currently being developed.

We are also in early stages of clinical development for DMT410 for treating various medical and aesthetic skin conditions and diseases, and if we obtain marketing approval in the future, we will compete with traditional therapies, such as topical products, oral products, in-office procedures, such as botulinum toxin injections, off-label drugs, over the counter medication and homeopathic remedies, as well as additional new entrants to the applicable markets.

We also expect to face competition in our efforts to identify appropriate collaborators or partners to help commercialize our product candidate portfolio in our target commercial markets.

Intellectual Property

Our commercial success depends in part on our ability to obtain and maintain proprietary protection for XYNGARI™, DMT400, DMT410 and any of our future product candidates, medical devices, methodologies, assays, drug development technologies, harvesting procedures, know-how;

We intend to commercialize our Tome skincare

products through a dual-channel marketing strategy that combines DTC advertising and B2B by targeting skincare professionals, by

building a practitioner community through a Tome certification program, where interested skincare professionals can complete a deep

dive certification program of our Tome product offerings.

With our multidimensional hero ingredient, we believe that it should not

be limited to just one commercialization strategy.

With our vision to provide consumers skintech at home, we believe there is an

additional set of consumers who seek the care of a skincare professional and would prefer to have treatments done in office.

Therefore, we see this dual-channel strategy as a way to increase our reach to a broader consumer segment than can be done with one

or the other.

We believe this is only possible due to the once-weekly application routine of Foundational Treatment as

most other treatments need to be applied at least daily or must be performed in-office by a professional.

Additionally, this hybrid

model provides us with the most flexibility in the future expansion of our Tome skincare line.

Direct-to-Consumer Marketing

Our DTC strategy is designed to drive consumer

awareness, education, and adoption through digital-first channels.

We expect to utilize a mix of performance and brand-oriented marketing

tactics, including paid digital advertising, social media platforms, search engine marketing, influencer and creator partnerships, and

educational content to drive consumer awareness and purchases.

These efforts are intended to communicate product positioning, usage regimen,

and key differentiators, while directing consumers to our owned digital properties for conversion and fulfillment.

We believe by pursuing

a DTC strategy we can properly educate consumers on our product offers beyond what they can read on a box.

We hope that through proper

education and awareness of the power of our skincare products, consumers will feel more invested in their skincare and Tome.

Our primary DTC channel is our owned e-commerce

platform, which enables us to control product positioning, pricing, merchandising, and customer experience.

Through this channel, we can

efficiently launch new products, run targeted promotions, test new claims and creative messaging, and optimize conversion through iterative

improvements to site performance, content, and checkout flows.

We also plan to selectively leverage third-party marketplaces and affiliate

partnerships to expand reach, while maintaining brand consistency and minimizing channel conflict.

Customer Acquisition Strategy.

to drive DTC growth through a diversified customer acquisition model that includes paid digital advertising, influencer and creator partnerships,

affiliate marketing, and organic demand generation or word-of-mouth.

Paid channels may include social media advertising, search engine

marketing, and retargeting campaigns, optimized using performance metrics such as customer acquisition cost, conversion rate, and lifetime

We also plan to invest in brand-building initiatives such as educational content, dermatologist-and aesthetician-aligned messaging,

and community-driven social engagement to improve efficiency over time by increasing organic traffic and repeat purchase rates.

and Lifecycle Marketing.

We emphasize retention as a core driver of profitability and sustainable growth.

Our lifecycle strategy

includes personalized email and SMS marketing, application and replenishment reminders, loyalty and referral programs, and subscription

or auto-replenishment offerings where appropriate.

We aim to increase repeat purchase frequency by promoting regimen-based usage, the

eventual sale of cross-selling complementary products, and delivering ongoing skincare education tailored to customer needs and skin

We plan to track key retention metrics including repeat purchase rate, cohort performance, and churn to continuously improve

engagement and product adoption.

We believe by monitoring these metrics we can more easily identify our high value users that help build

brand loyalty.

Operations, Fulfillment, and Scalability .

Our DTC operations will be supported by scalable fulfillment and logistics capabilities, including third-party warehousing and shipping

We will seek to maintain high service levels through reliable inventory planning, demand forecasting, and quality assurance

We continually evaluate packaging, shipping methods, and fulfillment workflows to balance cost efficiency with delivery speed

and customer satisfaction.

As order volume increases, we expect to realize improved efficiencies through operational scale and vendor

optimization.

Risks and Considerations.

Our DTC strategy is subject to risks including rising digital advertising costs, platform algorithm changes,

increased competition, evolving consumer preferences, and supply chain disruptions.

Additionally, customer acquisition performance may

fluctuate due to macroeconomic conditions and changes in privacy regulations that affect targeting and attribution.

We seek to mitigate

these risks by diversifying acquisition channels, strengthening organic demand, investing in retention, and maintaining operational flexibility.

Our DTC commercialization strategy is designed to (i) build durable customer relationships through a differentiated brand

experience, (ii) improve profitability through higher margin sales and repeat purchase behavior, and (iii) create a scalable platform

for new product launches and long-term growth.

We believe our disciplined execution across acquisition, retention, and operational scalability

positions us to expand our customer base and drive sustainable DTC revenue growth.

- Professional Channel Marketing

addition to a DTC channel, we also plan to pursue a B2B commercialization strategy, or professional channel marketing, focused on building

trusted relationships with licensed aestheticians, dermatology practices, and other qualified skincare professionals.

This channel is

designed to expand awareness and adoption through professional recommendation, strengthen clinical credibility, and create a recurring,

high-retention revenue stream driven by protocol-based usage and repeat replenishment.

We believe professional endorsement and education

can serve as a meaningful catalyst for consumer conversion, particularly for products positioned around clinically informed ingredients

and outcomes, like our Foundational Treatment.

Target Customers and Channel Positioning.

Our primary B2B customers

will likely include licensed aestheticians, dermatology practices, medical spas, and other skincare professionals who influence consumer

purchasing decisions through treatment protocols and product recommendations.

We plan to position our portfolio as a professional-grade

skincare system supported by education, usage guidance, and regimen-based solutions.

We intend to differentiate through product efficacy,

ingredient transparency, and professional training designed to improve consumer outcomes and satisfaction.

Providing consumers the option

to have their treatment done in-office will allow the skincare professionals the flexibility to use our hero ingredient in other skincare

treatments as they see fit.

Marketing and Demand Generation.

We intend to build awareness within the professional community through a combination of targeted

outreach and industry marketing initiatives.

These efforts may include attendance at professional conferences and trade events, partnerships

with key opinion leaders (“KOLs”), professional sampling, and educational webinars.

We also plan to leverage practice-facing

digital marketing, including paid search and social campaigns targeted to licensed professionals, as well as email marketing and professional

community engagement to drive onboarding and repeat purchasing.

Certification

Program and Professional Education .

A core element of our B2B strategy will be a structured certification program intended to educate

professionals on product science, ingredient benefits, and recommended treatment and home-care protocols.

The certification program will

be designed to ensure consistent product usage, enhance treatment outcomes, and support high-quality recommendations to consumers.

components may include:

● Foundational

training modules covering skin physiology, key actives, product indications, contraindications,

and regimen construction.

● Protocol-based

education for common skin concerns (e.g., acne, hyperpigmentation, aging, sensitive skin),

including sequencing and frequency guidance.

and credentialing , such as knowledge checks or final examinations, with certification

status granted upon completion.

continuing education , including periodic updates on new products, clinical learnings,

and evolving best practices.

● Professional

resources , including downloadable treatment guides, consumer handouts, before-and-after

documentation standards, and retail merchandising support.

expect the certification program to increase practitioner confidence, improve consistency of use across settings, and drive higher conversion

and repeat purchasing through protocol adherence and customer satisfaction.

Practice Enablement and Commercial Terms.

We plan to support professional

partners with tools and incentives designed to make adoption and ongoing selling efficient.

This may include professional starter kits,

backbar formats where applicable, retail-ready merchandising, and reordering tools integrated into our B2B platform.

We may offer tiered

pricing, minimum order thresholds, referral codes, and volume-based incentives to align with practice economics while maintaining premium

brand positioning.

Certified providers may receive access to exclusive benefits such as early product access, advanced training, co-marketing

opportunities, and priority support.

Model and Account Development .

We plan to execute this channel through a combination of inside sales, strategic field support in

key markets, and digital self-serve ordering for smaller accounts.

Our approach emphasizes long-term account development through training,

replenishment cadence management, and practice-specific regimen customization.

We plan to measure account performance using metrics such

as reorder frequency, average order value, number of certified professionals per account, and sell-through performance where available.

This will allow us to monitor and reward high sellers with additional incentives.

with DTC Strategy .

We believe the professional channel can act as a complementary driver of DTC growth by increasing consumer trust

and accelerating trial through professional recommendation.

We may support certified professionals with referral tools, co-branded landing

pages, or consumer education materials that encourage ongoing replenishment through either the professional channel or our owned e-commerce

platform, depending on partner preference and channel strategy.

We intend to manage pricing and messaging across channels to reduce conflict

and preserve brand integrity.

We also intend to list certified providers on our website so interested consumers may contact them for

virtual or in-office consultations.

We believe this will provide greater consumer confidence in their purchase.

Risks and Considerations .

The professional channel is subject to risks including slower onboarding cycles, variability in practitioner

engagement, competitive offerings, and regulatory considerations related to product claims and professional marketing.

Additionally,

scaling the channel requires consistent training quality and operational support.

We seek to mitigate these risks through standardized

certification content, dedicated partner support, disciplined account qualification, and ongoing measurement of partner performance.

Our B2B strategy is designed to (i) establish credibility through professional adoption and recommendation, (ii) create

recurring revenue through replenishment-driven purchasing behavior, (iii) expand brand awareness among high-intent consumers through

trusted professional relationships, and (iv) build a scalable platform for future product launches supported by practitioner education

and certification.

Go-to-Market Approach

We believe the combination of DTC marketing and B2B professional engagement

provides a complementary approach to building brand awareness and credibility.

DTC marketing is intended to generate consumer demand at

scale, while professional outreach is expected to support trust, validation, and longer-term brand equity within the skin-care ecosystem.

expect to scale marketing investments gradually following launch, with flexibility to adjust channel mix, spending levels, and geographic

focus based on market response, operational capacity, and regulatory considerations.

Our ability to execute this strategy successfully

will depend on multiple factors, including competitive dynamics, consumer acceptance, marketing efficiency, and our ability to maintain

compliance with applicable laws and regulations governing OTC products and advertising.

business is subject to various laws and regulations, particularly with respect to our product categories.

As is the case with most companies

in our industry, we receive inquiries from time to time from government regulatory authorities regarding the nature of our business and

other issues, such as compliance with local direct selling, transfer pricing, customs, taxation, foreign exchange control, securities

and other laws.

OTC and cosmetic products and related promotional and marketing activities are subject to extensive government regulation by numerous

federal, state, and local government agencies and authorities, including the United States Food and Drug Administration (the “FDA”),

the Federal Trade Commission (the “FTC”), the Consumer Product Safety Commission, the Department of Agriculture, United States

and State Attorneys General, and state regulatory agencies in the United States, and similar government agencies in all other markets

in which we may operate in the future.

In the United States, the FDA, in particular, regulates the formulation, manufacture and labelling

of OTC drugs, cosmetics, dietary supplements, foods and medical devices such as those that we distribute.

of Skincare Products in the United States.

Our skincare products are subject to various laws and regulations that regulate cosmetic

and personal care products and set forth regulations that, among other things, determine whether a product can be marketed as a “cosmetic”

or as an OTC drug.

In the United States, the regulation of cosmetic content and labeling is under the primary jurisdiction of the FDA.

Cosmetics are not subject to pre-market approval by the FDA, but their ingredients and their label and labeling content are regulated

by the FDA, and those who sell cosmetics have the burden to ensure that they are safe for use as directed and not adulterated or misbranded.

The labeling of cosmetic products is subject to the requirements of the Federal Food, Drug, and Cosmetic Act (“FDCA”), the

Fair Packaging and Labeling Act and other FDA regulations.

In 2024, the FDA began implementing portions of the Modernization of Cosmetics

Regulation Act of 2022 (“MoCRA”).

MoCRA increases the regulation of cosmetics by, among other things, requiring cosmetic

manufacturer facility registration, product listings, and reporting of serious adverse events to the FDA.

Rollout of MoCRA will continue

in the coming years, including the issuance of cosmetic GMPs.

Failure to correctly interpret and comply with the new requirements could

lead to government actions against us and the associated impairment to our business.

FDCA defines cosmetics by their intended use, as “articles intended to be rubbed, poured, sprinkled, or sprayed on, introduced

into, or otherwise applied to the human body .

for cleansing, beautifying, promoting attractiveness, or altering the appearance .

.” Among the products included in this definition are skin moisturizers, perfumes, lipsticks, fingernail polishes, eye and

facial makeup preparations, shampoos, permanent waves, hair colors, toothpastes and deodorants, as well as material intended for use

as a component of a cosmetic product.

A product may be considered a drug if it is intended for use in the diagnosis, cure, mitigation,

treatment, or prevention of disease, or is intended to affect the structure or any function of the body (“structure/function claims”).

A product’s intended use can be inferred from marketing or product claims, and regulators may consider the marketing claims of

our sales force.

Structure/function claims are generally prohibited for cosmetic products as are disease prevention and treatment claims.

The FDA prohibits certain ingredients from being included in cosmetic products.

It is possible that cosmetic product ingredients now

commonly in use may be restricted or prohibited in the future as more is learned about such ingredients.

recent years, the FDA has issued warning letters to many cosmetic companies alleging improper structure/function claims regarding their

cosmetic products, including, for example, product claims regarding gene activity, cellular rejuvenation, and rebuilding collagen.

companies confront difficulty in determining whether a claim would be considered by the FDA to be an improper structure/function claim.

Given this difficulty, and our research and product development focus on the sources of aging and the influence of certain ingredients

on gene expression, there is a risk that we could receive a warning letter, be required to modify our product claims, or take other actions

to satisfy the FDA if the FDA determines any of our marketing materials contain improper structure/function claims for our cosmetic products.

In addition, plaintiffs’ lawyers have filed class action lawsuits against some of our competitors after our competitors received

these FDA warning letters.

There can be no assurance that we will not be subject to government actions or lawsuits, which could harm

our business.

products, such as acne treatments, are classified as OTC drugs.

OTC drugs are subject to many of the same regulations as prescription

drugs, including compliance with general labeling requirements and cGMPs.

Most OTC drug products are marketed in conformity with the

requirements of an FDA-established OTC drug monograph that is applicable to that drug.

An OTC drug monograph is a type of “recipe

book” covering acceptable ingredients, doses, formulations, directions for use, warnings, and, in some cases, testing parameters.

Products conforming to a monograph may be marketed without FDA pre-approval.

OTC monographs include well-known ingredients and specific

requirements for permitted indications, required warnings and precautions, allowable combinations of ingredients and dosage levels.

Pharmaceutical

products marketed under the OTC monograph system must conform to specific quality, formula and labeling requirements.

Facilities where

OTC drugs are manufactured, tested, packaged, stored or distributed must be registered with FDA and comply with cGMP regulations and/or

regulations promulgated by the FDA or other competent authorities.

OTC monograph products that do not comply with these standards can

be deemed unapproved new drugs and can be required to be withdrawn from the market.

OTC drug products are marketed under approved New Drug Applications (“NDA”) rather than under OTC monographs.

FDA were to find that one of our OTC drug products is not being marketed in compliance with the OTC monograph that is applicable to that

drug product, we may be required to reformulate the product or cease marketing that product until it is the subject of an approved NDA

or until the time, if ever, that the monograph is amended to include such product.

and Product Claims.

of our major markets also regulate advertising and product claims regarding the efficacy and quality of products and require adequate

and reliable scientific substantiation of all claims.

In some cases, such regulations may limit our ability to inform consumers of some

of the benefits our products offer.

The FTC, which exercises primary jurisdiction over the advertising of all of our products in the United States, has instituted

enforcement actions against cosmetic companies for, among other things, deceptive advertising and lack of adequate scientific substantiation

We also face limitations on our use of the scientific experts who have helped us develop and test some of our products.

the United States, for example, the FTC’s Guides Concerning the Use of Endorsements and Testimonials in Advertising may restrict

marketing to those results obtained by a “typical” consumer and require disclosure of any material connections between an

endorser and the company or products they are endorsing.

This negative publicity could harm consumers’ perception of our business

and our products, which could negatively impact our revenue.

We cannot be sure that the FTC, or comparable foreign agencies, will not

question our advertising or other operations in the future.

recent years, the FTC has initiated numerous investigations of and actions against companies that sell OTC and cosmetic products.

FTC may enforce compliance with the law in a variety of ways, both administratively and judicially, using compulsory process, cease and

desist orders, and injunctions.

FTC enforcement can result in consent decrees or orders requiring, among other things, injunctive provisions,

corrective advertising, consumer redress, and such other relief as the agency deems necessary to protect the public.

Violation of these

consent decrees or orders could result in substantial financial or other penalties.

The FTC also sends warning letters as it monitors

companies’ activities.

In addition, during 2023, the FTC sent notices of penalty offense to nearly 700 companies, including us,

regarding the requirement of sufficient substantiation for product claims.

Pursuant to the FTC’s “penalty offense authority,”

companies that received the notice are expected to comply with the standards set in the FTC’s prior administrative cases on this

topic, and they could incur significant civil penalties if they or their representatives fail to do so.

No assurance can be given that

the FTC will not question our advertising or other operations in the United States in the future.

Any action in the future by the FTC

could materially and adversely affect our ability to successfully market our products in the United States.

The medical and aesthetic skin care markets in which we plan to sell

our Tome skincare products are crowded with many small, medium, and large skin care companies.

While we believe that our unique natural,

once-weekly Tome Foundational Treatment and eventual Clearing Treatment will differentiate Dermata from other competitive OTC

acne and skincare products, we will face significant competition from established consumer skin-care brands such as Neutrogena®, Proactiv®,

Clean & Clear®, PanOxyl®, La Roche-Posay®, CeraVe®, and Differin®, many of which are owned or distributed by large

multinational consumer health companies.

These brands offer a range of acne products utilizing well-known active ingredients and benefit

from broad retail distribution, significant brand recognition, and substantial marketing resources.

Moreover, many of these competitors

have substantially greater manufacturing, financial, research and development, and OTC marketing experience, with a substantially greater

portfolio of OTC and skin care/cosmetic products than we do.

As a result, our prospective competitors may be able to develop competing

or superior products and compete more aggressively and sustain their competitive advantage over a longer period of time than us.

may be rendered obsolete or may lack economic viability in the face of competition.

addition, we compete with digital-first and DTC skincare companies, including brands such as Curology®, Apostrophe®, Hims &

Hers®, and similar platforms, some of which offer prescription-based acne treatments alongside OTC products.

While prescription products

differ from OTC treatments, these companies may compete for the same consumer attention and discretionary spending.

also face indirect competition from professional-only or clinic-dispensed skin-care brands recommended or sold by dermatologists and

aestheticians, as well as from generic and private-label OTC acne products offered by retailers and online marketplaces, which may compete

primarily on price.

our Foundational Treatment is our first product launch, we plan to develop and launch additional products utilizing our Bioneedle

and know-how.

These new products, which could be future OTC products for diseases like acne, psoriasis or seborrheic dermatitis or Spongilla -based

skin care/cosmetic product, will likely face competition from other OTC or prescription products, as well as other “spicule-based”

cosmetic products, many of whom have established sales and brand name awareness among the consumers we will be targeting.

commercial success depends in part on our ability to obtain and maintain proprietary protection for our Clearing Treatment, Bioneedle

Delivery System and any of our future products, medical devices, methodologies, assays, drug development technologies, harvesting procedures,

to operate without infringing on or otherwise violating the proprietary rights of others;

and to prevent others from infringing or otherwise violating our proprietary rights.

and to prevent others from infringing

or otherwise violating our proprietary rights.

Our strategy is to protect our proprietary position by, among other things, filing U.S.

and foreign patent applications related to our product candidate and other proprietary technologies, inventions and improvements that are important to the development and implementation of our business.

We also rely on trade secrets, trademarks, know-how, continuing technological innovations, exclusivity agreements, nondisclosure and confidentiality agreements, license agreements, assignment of inventions and potential in-licensing opportunities to develop and maintain our proprietary position.

Patent Portfolio

Our patent estate consists of in-licensed and solely owned patent applications.

and foreign patent applications related to our product and other proprietary technologies, inventions and improvements that are important

to the development and implementation of our business.

We also rely on trade secrets, trademarks, know-how, continuing technological

innovations, exclusivity agreements, nondisclosure and confidentiality agreements, license agreements, assignment of inventions and potential

in-licensing opportunities to develop and maintain our proprietary position.

patent estate consists of in-licensed and solely owned patent applications.

Typically, we initially file U.S.

provisional patent applications and then file applications directly or under the Patent Cooperation Treaty, or PCT, which is an international patent law treaty that provides a unified procedure for filing a single initial patent application to seek patent protection for an invention simultaneously in any one of the designated member jurisdictions and states, including in the U.S.

Although a PCT application does not issue as a patent, it allows the applicant to seek protection in any of the member states through national phase applications filed at a later date.

We currently have multiple patents and patent applications in our patent portfolio and continue to pursue and seek additional patent coverage of all our product candidates.

Our XYNGARI™ portfolio includes two families, one in-licensed and one owned by Dermata.

The in-licensed family includes patents and patent applications in-licensed from Villani, Inc.

related to therapeutic compositions and methods for treating skin conditions.

The in-licensed portfolio consists of one pending non-provisional U.S.

patent application, two granted U.S.

patents, and granted foreign patents in Australia, Brazil, Canada, France, Germany, Ireland, Italy, Mexico, Russia, Singapore, South Korea, Spain, Switzerland, and the United Kingdom.

Additionally, the issued foreign patent in Japan, has lapsed and is no longer in force or valid.

These in-licensed patents expired between 2022 and 2023 and did not receive any patent term adjustments or extensions.

Based on the anticipated timing of any potential FDA approval of XYNGARI™ for acne, the patents that expired in 2022 and 2023 are not material to our business, as we do not expect these patents to provide any protection for our product candidates and thus we have provided our licensor with a notice of abandonment for certain licensed patents.

We expect our intellectual property portfolio to be protected by any potential NCE exclusivity for XYNGARI™ and our other product candidates, the maintaining of our exclusive supply agreement for our raw material requirements, and our continued efforts to protect our proprietary information.

We also have an additional Dermata owned family related to XYNGARI™, with a recent patent issuance in the U.S.

by the United States Patent and Trademark Office, entitled “Compositions and methods for the treatment of skin conditions” (U.S.

We also have applications pending in Australia, and Canada.

This family refers to specific attributes of the XYNGARI™ API and drug product as well as treatment related attributes for the treatment of acne based on the data received prior to its filing.

Patents in this patent family, if granted, are expected to expire in 2041, absent any patent term adjustments or extensions.

Our DMT410 portfolio includes two families owned by Dermata.

The first family consists of one issued patent in Japan, one allowed application in Australia, a pending non-provisional U.S.

patent application, and six pending foreign patent applications in Canada, China, the European Patent Office, Japan, Hong Kong, and South Korea.

These patents/patent applications relate to compositions for the treatment of skin diseases using our proprietary sponge powder in combination with multiple types of botulinum toxin for both medical and aesthetic skin conditions and diseases.

Patents in this patent family, if granted, are expected to expire in 2039, absent any patent term adjustments or extensions.

The second family is related to certain of our clinical methods related to sponge powder and botulinum toxin.

This second family consists of two pending US non-provisional applications and additional applications pending in Australia, Canada, the European Patent Office, Japan, and South Korea.

Patents in this patent family, if granted are expected to expire in 2041, absent any patent term adjustments or extensions.

Our DMT400 portfolio includes three families owned by Dermata.

The first family consists of pending applications in the U.S., Canada, and Japan covering our sponge powder in combination with many approved and development stage monoclonal antibodies for the treatment of skin diseases.

Patents in this patent family, if granted, are expected to expire in 2039, absent any patent term adjustments or extensions.

The second family consists of pending applications in the U.S., Australia, Japan, and South Korea, covering compositions for the treatment of conditions by dermal fillers in combination with our proprietary sponge powder.

provisional patent applications

and then file applications directly or under the Patent Cooperation Treaty, or PCT, which is an international patent law treaty that

provides a unified procedure for filing a single initial patent application to seek patent protection for an invention simultaneously

in any one of the designated member jurisdictions and states, including in the U.S.

Although a PCT application does not issue as a patent,

it allows the applicant to seek protection in any of the member states through national phase applications filed at a later date.

currently have multiple patents and patent applications in our patent portfolio and continue to pursue and seek additional patent coverage

of all our products.

Our Clearing Treatment portfolio includes one

family owned by us.

Our family related to Clearing Treatment for acne, with a patent issuance in the U.S.

by the United States Patent

and Trademark Office, entitled “Compositions and methods for the treatment of skin conditions” (U.S.

and a recent granted patent in Australia by the Australian Patent Office, entitled Compositions and methods for the treatment of skin

conditions” (Australian Patent No.

2019419387) .

We also have applications pending in

This family refers to specific attributes of our Bioneedle as well as treatment related attributes for the treatment of acne based

on the data received prior to its filing.

Patents in this patent family, if granted, are expected to expire in 2041 in the US and in 2039

in other jurisdictions, absent any patent term adjustments or extensions.

We expect our intellectual property portfolio to be protected

by patents, the maintaining of our exclusive supply agreement for our raw material requirements, and our continued efforts to protect

our proprietary information including trade secrets.

BDS for Delivery of Botulinum Toxin

Our BDS for delivery of botulinum toxin portfolio

includes two families owned by Dermata.

The first family consists of issued patents in Japan and Australia, a pending non-provisional

patent application, and six pending foreign patent applications in Canada, China, the European Patent Office, Japan, Hong Kong, and

These patents/patent applications relate to compositions for the treatment of skin diseases using our proprietary sponge

powder in combination with multiple types of botulinum toxin for both medical and aesthetic skin conditions and diseases.

Patents in this

patent family, if granted, are expected to expire in 2039, absent any patent term adjustments or extensions.

The second family is related

to certain of our clinical methods related to sponge powder and botulinum toxin.

This second family consists of two pending US non-provisional

applications and additional applications pending in Australia, Canada, Hong Kong, the European Patent Office, Japan, and South Korea.

Patents in this patent family, if granted are expected to expire in 2041, absent any patent term adjustments or extensions.

The third family consists of a pending PCT application filed in January of 2024, covering the compositions for the treatment of conditions by vaccines in combination with our proprietary sponge powder.

Although we believe our patent portfolio offers significant protection for XYNGARI™, DMT410 and DMT400 and additional combination regimens, the protection offered by our patents may be, to some extent, more limited than the protection provided by patents which claim chemical structures which were previously unknown.

Accordingly, other parties may compete with us, for example, by independently developing or obtaining competing topical formulations that design around our patent claims, but which may contain the same or similar active ingredients, or by seeking to invalidate our patents.

The term of individual patents depends upon the laws of the countries in which they are obtained.

In most countries in which we file, the patent term is 20 years from the earliest priority date of filing of a non-provisional patent application.

However, the term of United States patents may be extended for delays incurred due to compliance with the FDA, requirements or by delays encountered during prosecution that are caused by the United States Patent and Trademark Office, or the USPTO.

For example, the Hatch-Waxman Act permits a patent term extension for FDA-approved drugs of up to five years beyond the expiration of the patent.

Our BDS for other large molecule portfolio includes

one family owned by Dermata.

The family consists of pending applications in the U.S., Australia, and Japan, covering compositions for

the treatment of conditions by dermal fillers in combination with our proprietary sponge powder.

Patents in this patent family, if granted,

are expected to expire in 2040, absent any patent term adjustments or extensions.

Although we believe our patent portfolio offers

significant protection for our Clearing Treatment, BDS for delivery of Botulinum Toxin, BDS for other large molecules, and additional

combination regimens, the protection offered by our patents may be, to some extent, more limited than the protection provided by patents

which claim chemical structures which were previously unknown.

Accordingly, other parties may compete with us, for example, by independently

developing or obtaining competing topical formulations that design around our patent claims, but which may contain the same or similar

active ingredients, or by seeking to invalidate our patents.

The term of individual patents depends upon the laws of the countries

in which they are obtained.

In most countries in which we file, the patent term is 20 years from the earliest priority date of filing

of a non-provisional patent application.

However, the term of United States patents may be extended for delays incurred due to compliance

with the FDA, requirements or by delays encountered during prosecution that are caused by the United States Patent and Trademark Office,

or the USPTO.

For example, the Hatch-Waxman Act permits a patent term extension for FDA-approved drugs of up to five years beyond the

expiration of the patent.

The length of the patent term extension is related to the length of time the drug is under regulatory review.

Patent term extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval, and only one patent applicable to an approved drug may be extended.

Similar provisions are available in Europe and other jurisdictions to extend the term of a patent that covers an approved drug.

In the future, if and when our product candidates receive FDA approval, we expect to apply for patent term extensions on patents covering those product candidates.

We intend to seek patent term extensions in any jurisdiction where these are available and where we also have a patent that may be eligible;

however there is no guarantee that the applicable authorities, including the United State Patent and Trademark Office and United States FDA, will agree with our assessment of whether such extensions should be granted, and even if granted, the length of such extensions.

Other Intellectual Property

In addition to patent protection, we also rely heavily on trade secrets, including unpatented know-how, technology innovation, technical specifications and assays and other proprietary information in attempting to develop and maintain our competitive advantage.

We believe our ability to protect our unpatented know-how and trade secrets are as important if not more important than our patent portfolio due to the complex nature and lack of expiration associated with such information.

We seek trademark protection in the United States and in certain other jurisdictions where available and when we deem appropriate.

We currently have registrations for Dermata in the United States and multiple other jurisdictions.

We intend to file applications for trademark registrations in connection with our therapeutic candidates in various jurisdictions, including the United States.

Patent term extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval, and only

one patent applicable to an approved drug may be extended.

Similar provisions are available in Europe and other jurisdictions to extend

the term of a patent that covers an approved drug.

In the future, if and when our products receive FDA approval, we expect to apply for

patent term extensions on patents covering those products.

We intend to seek patent term extensions in any jurisdiction where these are

available and where we also have a patent that may be eligible;

however there is no guarantee that the applicable authorities, including

the United State Patent and Trademark Office and United States FDA, will agree with our assessment of whether such extensions should be

granted, and even if granted, the length of such extensions.

Intellectual Property

In addition to patent protection, we also rely

heavily on trade secrets, including unpatented know-how, technology innovation, technical specifications and assays and other proprietary

information in attempting to develop and maintain our competitive advantage.

We believe our ability to protect our unpatented know-how

and trade secrets are as important if not more important than our patent portfolio due to the complex nature and lack of expiration associated

with such information.

We seek trademark protection in the United States

and in certain other jurisdictions where available and when we deem appropriate.

We currently have registrations for Dermata in the United

States and multiple other jurisdictions.

We also have pending applications for trademark registrations for Tome, Tome Skincare, Bioneedle,

Bioneedles, Tome Bioneedles, Studied Skincare, and we intend to continue to file additional applications for trademark registrations in

connection with our products in various jurisdictions, including the United States.

Material Agreements

License Agreement between Dermata Therapeutics, LLC and Villani, Inc.

On March 31, 2017, we entered into a License Agreement (or, the License Agreement) with Villani, Inc.

(or, Villani), whereby Villani has granted us an exclusive, sub-licensable, royalty-bearing license (or, the License) under the Licensed Patents (as defined in the License Agreement), to formulate, develop, seek regulatory approval for, make or sell products that contain Spongilla lacustris (alone or in combination with other active or inactive ingredients) for the treatment of diseases, disorders and conditions of the skin, including but not limited to acne, rosacea, psoriasis, atopic dermatitis, seborrheic dermatitis, actinic keratosis and eczema that were developed using certain licensed know-how (or, the Licensed Products).

We are responsible for the development (including manufacturing, packaging, non-clinical studies, clinical trials and obtaining regulatory approval) and commercialization (including marketing, promotion, distribution, etc.) for all Licensed Products.

In partial consideration of the License, we forgave our outstanding loan to Villani in the amount of $400,000 and agreed to make future milestone payments to Villani.

The milestone payments due to Villani under the License Agreement have been amended to the amounts described below in connection with our entry into the Second License Amendment (as defined below).

The License Agreement may be terminated (i) by either party for material breach with 90 days written notice, or 30 days’ notice if for material payment breach, if such material breach is not cured within such notice period, (ii) immediately upon written notice to either party if either party initiates a voluntary bankruptcy proceeding, dissolves or winds-up its business, (iii) immediately upon written notice to either party if either party becomes subject to involuntary bankruptcy proceedings, if such proceedings are not dismissed or stayed within 90 days.

The License Agreement includes customary terms relating to, among others, indemnification, intellectual property protection, confidentiality, remedies, and warranties.

On June 4, 2019, we entered into a License Amendment and Settlement Agreement (or the First License Amendment) with Villani.

Pursuant to the First License Amendment, we made milestone payments to Villani in an aggregate amount of $750,000, and in exchange for certain know-how, we issued to Villani 5,221,156 units of our Series 1c Preferred Units (which units were converted into shares of our Series 1c Preferred Stock in connection with our conversion into a Delaware corporation, which was equal to 5% of our total capitalization (on a fully-diluted basis) at the time of issuance).

At the time of issuance, these units were valued at $730,962.

We subsequently cancelled the shares of Series 1c Preferred Stock issued to Villani pursuant to the Second License Amendment, as described below.

Pursuant to the First License Amendment, we also agreed to make certain milestone payments to Villani, which rates were subsequently amended pursuant to the Second License Amendment, as discussed below.

On July 30, 2021, we entered into a Second Amendment to the License and Settlement Agreement (or, the Second License Amendment), whereby, for the settlement of certain disputes arising under the First License Amendment, we agreed to exchange the shares of Series 1c Preferred Stock owned by Villani for an increase of milestone payments and royalty rates due to Villani under the License Agreement.

The resulting royalty rates payable pursuant to the Second License Amendment are equal to single-digit percentages of net sales of Licensed Products and HMW Combination Products (as defined in the License Agreement), subject to certain adjustments as set forth in the Second License Amendment.

Royalties are payable on a country-by-country and Licensed Product-by-Licensed Product basis, for the period of time from the effective date of the License Agreement until the later of (i) the expiration of the last to expire valid claim in such country (which expired in 2023), (ii) the expiration of regulatory exclusivity for such Licensed Product in such country, and (iii) 15 years from the date of the first commercial sale of the Licensed Product in such country.

Pursuant to the Second License Amendment, if we sublicense the License, we are obligated to pay to Villani a sublicense fee of between 10% and 30% of Sublicense Revenues (as defined in the License Agreement).

Such future milestone payments due to Villani (all payable to Villani in cash or in equity, at the option of Villani) are in aggregate amounts of up to $3.5 million in development milestones and $37.0 million in sales milestones.

To date, we have paid Villani a total of $1,750,000 in connection with the License Agreement, inclusive of a $750,000 milestone payment and $1.0 million payment upon the closing of our initial public offering.

Clinical Trial Collaboration Agreement between the Company and Revance Therapeutics, Inc.

On January 17, 2025, the Company entered into a Clinical Trial Collaboration Agreement (Clinical Trial Agreement) with Revance Therapeutics, Inc.

(Revance), pursuant to which the Company and Revance intend to conduct a multi-center clinical trial (Trial) to evaluate the topical application of XYNGARI TM , the Company’s topical Spongilla powder (formerly referred to as DMT310), with DAXXIFY® (daxibotulinumtoxinA-lanm), Revance’s botulinum toxin type A.

Pursuant to the terms of the Clinical Trial Agreement, Revance has granted the Company a non-exclusive, worldwide, non-transferable, royalty-free license, with a right to sublicense (subject to limitations), to use certain Revance intellectual property, solely as necessary or useful for the Company to conduct the trial under the Clinical Trial Agreement.

The Company has granted Revance a similar license to use XYNGARI TM and other compound(s) under the Clinical Trial Agreement.

The Clinical Trial Agreement will terminate upon completion of the Trial, the delivery of the data resulting from the Trial and the completion of any statistical analyses of the data resulting from the Trial.

Either party may terminate the Clinical Trial Agreement upon a material breach by the other party that remains uncured following 30 days after the date of written notice of such breach.

In addition, either party may terminate the Clinical Trial Agreement immediately upon written notice if such party reasonably deems it necessary in order to protect the safety, health or welfare of subjects enrolled in the Trial.

The Company has agreed to sponsor, conduct, and fund the Phase 2a clinical trial, but no financial obligations or consideration is contemplated in the Clinical Trial Agreement.

Supply Agreement between the Company and Reka-Farm LLC

On February 27, 2020, we entered into an exclusive Supply Agreement (or, the Supply Agreement) with Reka-Farm, LLC (or, Reka-Farm), whereby Reka-Farm will supply us with the Spongilla raw materials necessary for use in the development of our product candidates.

Clinical Trial Collaboration Agreement between

the Company and Revance Therapeutics, Inc.

On January 17, 2025, the Company entered into

a Clinical Trial Collaboration Agreement (Clinical Trial Agreement) with Revance Therapeutics, Inc.

(Revance), pursuant to which the Company

and Revance intend to conduct a multi-center clinical trial (Trial) to evaluate the topical application of XYNGARI TM , the Company’s

topical Spongilla powder (formerly referred to as DMT310), with DAXXIFY® (daxibotulinumtoxinA-lanm), Revance’s botulinum

toxin type A.

Pursuant to the terms of the Clinical Trial Agreement, Revance has granted the Company a non-exclusive, worldwide, non-transferable,

royalty-free license, with a right to sublicense (subject to limitations), to use certain Revance intellectual property, solely as necessary

or useful for the Company to conduct the trial under the Clinical Trial Agreement.

The Company has granted Revance a similar license to

use topical Spongilla powder and other compound(s) under the Clinical Trial Agreement.

The Clinical Trial Agreement will terminate

upon completion of the Trial, the delivery of the data resulting from the Trial and the completion of any statistical analyses of the

data resulting from the Trial.

Either party may terminate the Clinical Trial Agreement upon a material breach by the other party that

remains uncured following 30 days after the date of written notice of such breach.

In addition, either party may terminate the Clinical

Trial Agreement immediately upon written notice if such party reasonably deems it necessary in order to protect the safety, health or

welfare of subjects enrolled in the Trial.

The Company has agreed to sponsor, conduct, and fund the Phase 2a clinical trial, but no financial

obligations or consideration is contemplated in the Clinical Trial Agreement.

At this time, the initiation of the Phase 2a clinical trial

has been placed on hold.

We still believe there is a potential to utilize our Spongilla powder for the topical delivery of botulinum

toxin and are currently evaluating the regulatory and commercial opportunities for this program.

Supply Agreement between the Company and Reka-Farm

On February 27, 2020, we entered into an exclusive

Supply Agreement (or, the Supply Agreement) with Reka-Farm, LLC (or, Reka-Farm), whereby Reka-Farm will supply us with the Spongilla

raw materials necessary for use in the development of our products.

The Supply Agreement has an indefinite term unless and until terminated.

For the term of the Supply Agreement, Reka-Farm is prohibited from supplying Spongilla for development and sale of any other product outside of the Russian Federation, other than Cosmetic Products (as defined in the Supply Agreement).

Pursuant to the Supply Agreement, we shall provide Reka-Farm with two-year rolling forecasts of our Spongilla raw material requirements, and such forecasts shall be provided to Reka-Farm on a semi-annual basis, beginning on January 1, 2021 (each, a Forecast).

Pursuant to the Supply Agreement, Reka-Farm has guaranteed its ability to supply us with the required amounts of Spongilla as specified in each Forecast for the first 12 months of each Forecast.

For the term of the Supply Agreement, Reka-Farm is prohibited from supplying Spongilla for development and sale of any other product

outside of the Russian Federation, other than Cosmetic Products (as defined in the Supply Agreement).

Pursuant to the Supply Agreement, we shall provide

Reka-Farm with two-year rolling forecasts of our Spongilla raw material requirements, and such forecasts shall be provided to Reka-Farm

on a semi-annual basis, beginning on January 1, 2021 (each, a Forecast).

Pursuant to the Supply Agreement, Reka-Farm has guaranteed its

ability to supply us with the required amounts of Spongilla as specified in each Forecast for the first 12 months of each Forecast.

All Forecasts are non-binding on us.

If Reka-Farm is unable to supply us with Spongilla raw material in accordance with a Forecast, all available quantities of Spongilla then available to Reka-Farm shall be made available to us on a first priority basis until all amounts of Spongilla set forth in the Forecast are supplied.

Pursuant to the Supply Agreement, we pay a pre-negotiated price per kilogram for Spongilla supplied by Reka-Farm, and we are required to pay to Reka-Farm a royalty payment of less than one percent of the Net Sales (as defined in the Supply Agreement) of any products we develop containing Spongilla raw material supplied by Reka-Farm.

The Supply Agreement may be terminated (i) by either party for material breach with 90 days written notice, if such material breach is not cured within such notice period and (ii) by us for any reason or no reason upon 90 days written notice to Reka-Farm.

The Supply Agreement includes customary terms relating to, among others, indemnification, intellectual property protection, confidentiality, remedies, warranties, as well as certain quality requirements.

Government Regulation

Our activities and products are significantly regulated by a number of governmental entities, including the U.S.

Food and Drug Administration, or FDA, in the United States and by comparable authorities in other countries.

These entities regulate, among other things, the research, development, testing, safety, effectiveness, manufacturing, storage, distribution, labeling, documentation, advertising and sale of our products.

We must obtain regulatory approval from the FDA and comparable authorities in other countries, as applicable, for our drug candidates before we can commercialize such drugs in the U.S.

and foreign jurisdictions.

Product development within this regulatory framework takes a number of years and involves the expenditure of substantial resources.

Many drug candidates that initially appear promising ultimately do not reach the market because they are found to be unsafe or ineffective when tested.

Our inability to commercialize a product would impair our ability to earn future revenues.

The process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local and foreign statutes and regulations require the expenditure of substantial time and financial resources.

Failure to comply with the applicable requirements at any time during the product development process, approval process or after approval may subject an applicant to administrative or judicial sanctions.

These sanctions could include the FDA’s refusal to approve pending applications, withdrawal of an approval, a clinical hold, warning letters, product recalls or withdrawals from the market, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement, or civil or criminal penalties.

Any agency or judicial enforcement action could have a material adverse effect on us.

Development of Drugs in the United States

Pre-Clinical Development

Products that we may develop or acquire in the future must be approved by the FDA before they may be legally marketed in the United States.

For new chemical entities, the pre-clinical development stage generally involves synthesizing the active component, developing the formulation and determining the manufacturing process, and drug stability as well as carrying out non-human toxicology, pharmacology and drug metabolism studies that support subsequent clinical testing.

These pre-clinical laboratory and animal tests are often performed under the FDA’s Good Laboratory Practices regulations.

A drug’s sponsor must submit the result of the pre-clinical tests, together with manufacturing information, analytical data and any available clinical data or literature and a proposed clinical protocol to the FDA as part of an IND application, which is a request for authorization from the FDA to administer an investigational drug or biological product to humans.

Similar filings are required in other countries.

Laboratory and animal tests continue to be performed after an IND is approved.

Clinical Trials

The clinical stage of development can generally be divided into three sequential phases that may overlap:

Phase 1, Phase 2, and Phase 3 clinical trials.

In Phase 1, generally, small numbers of healthy volunteers are initially exposed to single escalating doses and then multiple escalating doses of the product candidate.

The primary purpose of these studies is to assess the metabolism, pharmacologic action and general safety of the drug.

Phase 2 trials typically involve studies in disease-affected patients to determine the dose required to produce the desired benefits, common short-term side effects and risks.

Phase 2 studies are typically well-controlled, closely monitored, and conducted in a relatively small number of patients, usually involving no more than several hundred subjects.

Phase 3 trials are intended to gather the additional information about effectiveness and safety that is needed to evaluate the overall benefit-risk relationship of the drug and to provide an adequate basis for physician labeling.

Phase 3 studies usually include from several hundred to several thousand subjects and are closely controlled and monitored.

In addition to these Phase 1-3 trials, other trials may be conducted to gather additional safety, pharmacokinetic and pharmacodynamic information.

Pharmaceutical products with active ingredients equal or similar to those already approved by the FDA often have more streamlined development programs than compounds entirely new to the agency, often skipping Phase 1 and 2 trials.

A clinical plan must be submitted to the FDA prior to commencement of a clinical trial.

If the FDA has concerns about the clinical plan or the safety of the proposed studies, they may suspend or terminate the study at any time.

Studies must be conducted in accordance with good clinical practice and reporting of study progress and any adverse experiences is required.

Studies are also subject to review by independent institutional review boards responsible for overseeing studies at particular sites and protecting human research study subjects.

An independent institutional review board may also suspend or terminate a study once initiated.

Accordingly, we cannot be sure that submission of an IND will result in the FDA allowing clinical trials to begin, or that once begun, issues will not arise that could cause the trial to be suspended or terminated.

Post-approval studies, sometimes referred to as Phase 4 clinical trials, may be conducted after initial marketing approval.

Sometimes, these studies are used to gain additional experience from the treatment of patients in the intended therapeutic condition.

In certain instances, the FDA may mandate the performance of Phase 4 studies.

In other situations, post-approval studies aim to gain additional indications for a medication or develop new dosage forms for a medication.

Chemistry, Controls and Manufacturing Development

Concurrent with clinical trials, companies typically complete additional animal and laboratory studies, develop additional information about the chemistry and physical characteristics of the drug, determine proposed commercial formulations for the drug, and finalize a process for manufacturing the product in commercial quantities in accordance with FDA’s current Good Manufacturing Practices (“cGMP”) requirements.

The manufacturing process must consistently produce quality batches of the drug, and, among other things, the manufacturer must develop methods for testing the identity, strength, quality and purity of the final drug.

In addition, appropriate packaging must be selected and tested, and stability studies must be conducted to demonstrate the effectiveness of the packaging and that the compound does not undergo unacceptable deterioration over its shelf life.

Disclosure of Clinical Trial Information

Sponsors of clinical trials of FDA-regulated products, including biological products, are required to register and disclose certain clinical trial information on the website www.clinicaltrials.gov.

Information related to the product, patient population, phase of investigation, trial sites and investigators, and other aspects of a clinical trial are then made public as part of the registration.

Sponsors are also obligated to disclose the results of their clinical trials after completion.

Disclosure of the results of clinical trials can be delayed in certain circumstances for up to two years after the date of completion of the trial.

Competitors may use this publicly available information to gain knowledge regarding the progress of clinical development programs as well as clinical trial design.

Special Protocol Assessment

The Federal Food, Drug, and Cosmetic Act directs the FDA to meet with sponsors, pursuant to a sponsor’s written request, for the purpose of reaching agreement on the design and size of clinical trials intended to form the primary basis of an efficacy claim in a New Drug Application (NDA) or a Biologic Licensing Application (BLA).

If an agreement is reached, the FDA will reduce the agreement to writing and make it part of the administrative record.

This agreement is called a special protocol assessment (SPA).

While the FDA’s guidance on SPAs states that documented SPAs should be considered binding on the review division, the FDA has latitude to change its assessment if certain exceptions apply.

Exceptions include public health concerns emerging that were unrecognized at the time of the protocol assessment, identification of a substantial scientific issue essential to the safety or efficacy testing that later comes to light, a sponsor’s failure to follow the protocol agreed upon, or the FDA’s reliance on data, assumptions or information that are determined to be wrong.

Review and Approval in the United States

Following pivotal or Phase 3 trial completion, data are analyzed to determine safety and efficacy.

Data are then filed with the FDA in an NDA or BLA, along with proposed labeling for the product and information about the manufacturing and testing processes and facilities that will be used to ensure product quality.

In the United States, FDA approval of an NDA or BLA must be obtained before marketing a pharmaceutical product.

The NDA or BLA must contain proof of safety, purity, potency, and efficacy, which entails extensive pre-clinical and clinical testing.

The FDA will likely re-analyze the clinical trial data, which could result in extensive discussions between the FDA and us during the review process.

The review and evaluation of applications by the FDA is extensive and time consuming and may take several years to complete.

The FDA may conduct a pre-approval inspection of the manufacturing facilities for the new product to determine whether they comply with current good manufacturing practice requirements and may also audit data from clinical and pre-clinical trials.

There is no assurance that the FDA will act favorably or quickly in making such reviews and significant difficulties or costs may be encountered in our efforts to obtain FDA approvals.

The FDA may require that certain contraindications, warnings or precautions be included in the product labeling, or may condition the approval of the NDA or BLA on other changes to the proposed labeling, development of adequate controls and specifications, or a commitment to conduct post-marketing testing or clinical trials and surveillance programs to monitor the safety of approved products that have been commercialized.

Further, the FDA may place conditions on approvals including the requirement for a risk evaluation and mitigation strategy, or REMS, to assure the safe use of the drug.

If the FDA concludes a REMS is needed, the sponsor of the NDA or BLA must submit a proposed REMS;

the FDA will not approve the NDA or BLA without an approved REMS, if required.

A REMS could include medication guides, physician communication plans, or elements to assure safe use, such as restricted distribution methods, patient registries and other risk minimization tools.

Any of these limitations on approval or marketing could restrict the commercial promotion, distribution, prescription or dispensing of products.

Product approvals may be withdrawn for non-compliance with regulatory standards or if problems occur.

Orphan Drug Designation

Under the Orphan Drug Act, the FDA may grant orphan drug designation to a drug intended to treat a rare disease or condition, which is generally a disease or condition that affects fewer than 200,000 individuals in the United States.

Orphan product designation must be requested before submitting an NDA or BLA.

After the FDA grants orphan drug designation, the identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA.

Orphan product designation does not convey any advantage in or shorten the duration of regulatory review and approval process.

In addition to the potential period of exclusivity, orphan designation makes a company eligible for grant funding of up to $400,000 per year for four years to defray costs of clinical trial expenses, tax credits for clinical research expenses and potential exemption from the FDA application user fee.

If a product that has orphan designation subsequently receives the first FDA approval for the disease or condition for which it has such designation, the product is entitled to orphan drug exclusivity, which means the FDA may not approve any other applications to market the same drug for the same indication for seven years, except in limited circumstances, such as (i) the drug’s orphan designation is revoked;

(ii) its marketing approval is withdrawn;

(iii) the orphan exclusivity holder consents to the approval of another applicant’s product;

(iv) the orphan exclusivity holder is unable to assure the availability of a sufficient quantity of drug;

or (v) a showing of clinical superiority to the product with orphan exclusivity by a competitor product.

If a drug designated as an orphan product receives marketing approval for an indication broader than what is designated, it may not be entitled to orphan drug exclusivity.

There can be no assurance that we will receive orphan drug designation for our product candidates.

FDA Botanical Drug Development Guidance for Industry

Most currently approved topical dermatology products are reviewed solely by the FDA’s Office of Dermatology and Dental Products and follow a standard approval pathway.

However, due to our lead product candidate, XYNGARI™ , being derived from a natural source, it will be reviewed by the FDA Office of Dermatology and Dental Products with input from the FDA Botanical Review Division.

These advantages included being able to move into human clinical studies upon the FDA’s acknowledged receipt of our IND letter and that our subsequent study may proceed without having to first complete the typical nonclinical studies often required on many dermatology products, saving us substantial financial resources to achieve human clinical data.

Additionally, while we believe that our source sponge material contains multiple active chemical compounds, based on our regulatory analysis of the feedback from the FDA and the Botanical Guidance, we believe we are only required to provide identifiable and quantifiable active components to show quality control and batch to batch consistency.

We believe this will make it more difficult for a potential competitor to copy XYNGARI™ and produce a similar product due to their inability to know every component of our product candidate.

Thus, we believe a competitor with a similar product or product candidate would have to conduct all of the manufacturing, development, and regulatory steps we must complete for approval.

However, there can be no assurance that we successfully navigate the development of XYNGARI™ or that XYNGARI™ will receive FDA approval.

Special Regulatory Procedures

Fast track designation — The FDA is required to facilitate the development and expedite the review of drugs and biologics that are intended for the treatment of a serious or life-threatening disease or condition and that demonstrate the potential to address unmet medical needs.

Under the fast track program, the sponsor of a new drug or biologic candidate may request the FDA to designate the product for a specific indication as a fast track product, concurrent with or after the filing of the IND for the drug candidate.

A drug that receives fast track designation is eligible for some or all of the following:

(i) more frequent meetings with the FDA to discuss the drug’s development plan and ensure collection of appropriate data needed to support drug approval;

(ii) more frequent written communication from the FDA about such things as the design of the proposed clinical trials and use of biomarkers;

(iii) eligibility for accelerated approval and priority review, if relevant criteria are met;

and (iv) “Rolling Review,” which means that a drug company can submit completed sections of its BLA or NDA for review by the FDA, rather than waiting until every section of the NDA or BLA is completed before the entire application can be reviewed.

This rolling review is available if the applicant provides and the FDA approves a schedule for the submission of the remaining information and the applicant pays applicable user fees.

However, the FDA’s time period goal for reviewing a fast track application does not begin until the last section of the NDA or BLA is submitted.

In addition, the fast track designation may be withdrawn by the FDA if it believes that the designation is no longer supported by data emerging in the clinical trial process.

Priority review — Under FDA policies, a drug candidate may be eligible for priority review.

The priority review program provides for expedited review or an NDA or BLA, typically within a six to eight month time frame from the time a complete application is accepted for filing.

Products regulated by the FDA’s Center for Drug Evaluation and Research, or CDER, are eligible for priority review if they provide a significant improvement compared to marketed products in the treatment, diagnosis or prevention of a disease.

Products regulated by the FDA’s Center for Biologics Evaluation and Research, or CBER, are eligible for priority review if they provide a significant improvement in the safety or effectiveness of the treatment, diagnosis or prevention of a serious or life-threatening disease.

A fast track designated drug candidate could be eligible for priority review if supported by clinical data at the time of the BLA or NDA submission.

Accelerated approval — Under the law and the FDA’s accelerated approval regulations, the FDA may approve a drug or biologic for a serious or life-threatening illness that provides meaningful therapeutic benefit to patients over existing treatments based on a surrogate endpoint that is reasonably likely to predict clinical benefit.

Surrogate endpoints can often be measured more easily or more rapidly than clinical endpoints.

A drug candidate approved on this basis is subject to rigorous post-marketing compliance requirements, including the completion of Phase 4 or post-approval clinical trials to confirm the effect on the clinical endpoint.

Failure to conduct required post-approval studies, or confirm a clinical benefit during post-marketing studies, would allow the FDA to withdraw the drug from the market on an expedited basis.

All promotional materials for drug candidates approved under accelerated regulations are subject to prior review by the FDA.

Breakthrough therapy designation — The FDA is also required to expedite the development and review of the application for approval of drugs that are intended to treat a serious or life-threatening disease or condition where preliminary clinical evidence indicates that the drug candidate may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints.

Under the breakthrough therapy program, the sponsor of a new drug candidate may request that the FDA designate the drug candidate for a specific indication as a breakthrough therapy concurrent with, or after, the filing of the IND for the drug candidate.

Pediatric Information

Under the Pediatric Research Equity Act of 2003, an NDA, BLA or supplement to an NDA or BLA must contain data that are adequate to assess the safety and effectiveness of the drug or biological product for the claimed indications in all relevant pediatric subpopulations, and to support dosing and administration for each pediatric subpopulation for which the product is safe and effective.

The FDA may, on its own initiative or at the request of the applicant, grant deferrals for submission of some or all pediatric data until after approval of the product for use in adults, or full or partial waivers from the pediatric data requirements.

Under the Food and Drug Administration Safety and Innovation Act, or FDASIA, the FDA has additional authority to take action against manufacturers not adhering to pediatric study requirements.

Unless otherwise required by regulation, the pediatric data requirements do not apply to products with orphan drug designation.

Patent Term Restoration

Depending upon the timing, duration, and specifics of the FDA approval of the use of our current and potential product candidates, some of our U.S.

patents may be eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984 ("Hatch-Waxman Amendments").

The Hatch-Waxman Amendments permit a patent restoration term of up to five years as compensation for patent term lost during product development and the FDA regulatory review process.

However, patent term restoration cannot extend the remaining term of a patent beyond a total of 14 years from the product’s approval date.

The patent term restoration period is generally one-half the time between the effective date of an IND and the submission date of an NDA or BLA plus the time between the submission date of the NDA or BLA and the approval of that application.

Only one patent applicable to an approved biological product is eligible for the extension and the application for the extension must be submitted prior to the expiration of the patent.

Patent and Trademark Office, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration.

Drug Development in Europe

In the European Union, our future products may also be subject to extensive regulatory requirements.

Similar to the U.S., the marketing of medicinal products is subject to the granting of marketing authorizations by regulatory agencies.

Also, as in the U.S., the various phases of pre-clinical and clinical research in the European Union are subject to significant regulatory controls.

Review and Approval in the European Union

In the European Union, approval of new medicinal products can be obtained through one of three processes:

the mutual recognition procedure, the centralized procedure, and the decentralized procedure.

We intend to determine which process we will follow, if any, in the future.

Mutual Recognition Procedure:

An applicant submits an application in one European Union member state, known as the reference member state.

Once the reference member state has granted the marketing authorization, the applicant may choose to submit applications in other concerned member states, requesting them to mutually recognize the marketing authorizations already granted.

Under this mutual recognition process, authorities in other concerned member states have 55 days to raise objections, which must then be resolved by discussion among the concerned member states, the reference member state and the applicant within 90 days of the commencement of the mutual recognition procedure.

If any disagreement remains, all considerations by authorities in the concerned member states are suspended and the disagreement is resolved through an arbitration process.

The mutual recognition procedure results in separate national marketing authorizations in the reference member state.

Centralized Procedure:

This procedure is currently mandatory for products developed by means of a biotechnological process and optional for new active substances and other “innovative medicinal products with novel characteristics.” Under this procedure, an application is submitted to the European Agency for the Evaluation of Medical Products.

Two European Union member states are appointed to conduct an initial evaluation of each application.

These countries each prepare an assessment report that is then used as the basis of a scientific opinion of the Committee on Proprietary Medical Products.

If this opinion is favorable, it is sent to the European Commission, which drafts a decision.

After consulting with the member states, the European Commission adopts a decision and grants a marketing authorization, which is valid throughout the European Union and confers the same rights and obligations in each of the member states as a marketing authorization granted by that member state.

Decentralized Procedure:

The most recently introduced of the three processes for obtaining approval of new medicinal processes in the European Union, the decentralized procedure is similar to the mutual recognition procedure described above, but with differences in the timing that key documents are provided to concerned member states by the reference member state, the overall timing of the procedure and the possibility of, among other things, “clock stops” during the procedure.

Post-Marketing Requirements

Following approval of a new product, a pharmaceutical company and the approved product are subject to continuing regulation by the FDA and other federal and state regulatory authorities, including, among other things, monitoring and recordkeeping activities, reporting to applicable regulatory authorities of adverse experiences with the product, providing the regulatory authorities with updated safety and efficacy information, product sampling and distribution requirements, and complying with promotion and advertising requirements, which include, among others, standards for direct-to-consumer advertising, restrictions on promoting drugs for uses or in patient populations not described in the drug’s approved labeling (known as “off-label use”), and limitations on industry-sponsored scientific and educational activities.

Although physicians may prescribe legally available drugs for off-label uses, manufacturers may not market or promote such off-label uses.

Modifications or enhancements to the products or labeling or changes of site of manufacture are often subject to the approval of the FDA and other regulators, which may or may not be received or may result in a lengthy review process.

The FDA regulations require the products be manufactured in specific approved facilities and in accordance with current good manufacturing practices, and NDA and BLA holders must list their products and register their manufacturing establishments with the FDA.

These regulations also impose certain organizational, procedural and documentation requirements with respect to manufacturing and quality assurance activities.

Drug manufacturers and other entities involved in the manufacture and distribution of approved drugs are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with current good manufacturing practice and other laws.

NDA and BLA holders using contract manufacturers, laboratories or packagers are responsible for the selection and monitoring of qualified firms.

These firms are subject to inspections by the FDA at any time, and the discovery of violative conditions could result in enforcement actions that interrupt the operation of any such facilities or the ability to distribute products manufactured, processed or tested by them.

Other Regulatory Matters

Manufacturing, sales, promotion and other activities following product approval are also subject to regulation by numerous regulatory authorities in addition to the FDA, including, in the United States, the Centers for Medicare & Medicaid Services, or CMS, other divisions of the Department of Health and Human Services, the Drug Enforcement Administration, the Consumer Product Safety Commission, the Federal Trade Commission, the Occupational Safety & Health Administration, the Environmental Protection Agency, and state and local governments.

These regulations include:

the federal healthcare program anti-kickback law which prohibits, among other things, persons from soliciting, receiving or providing remuneration, directly or indirectly, to induce either the referral of an individual, for an item or service or the purchasing or ordering of a good or service, for which payment may be made under federal healthcare programs such as the Medicare and Medicaid programs;

federal false claims laws which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid, or other government reimbursement programs that are false or fraudulent.

The government may assert that a claim including items or services resulting from a violation of the federal healthcare program anti-kickback law or related to off-label promotion constitutes a false or fraudulent claim for purposes of the federal false claims laws;

the Federal Physician Payments Sunshine Act within the ACA, and its implementing regulations, require that certain manufacturers of drugs, devices, biological and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program (with certain exceptions) to report information related to certain payments or other transfers of value made or distributed to physicians and teaching hospitals, or to entities or individuals at the request of, or designated on behalf of, the physicians and teaching hospitals and to report annually certain ownership and investment interests held by physicians and their immediate family members;

the Health Insurance Portability and Accountability Act, or HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and its implementing regulations, imposes certain requirements relating to the privacy, security and transmission of individually identifiable health information.

Among other things, HITECH makes HIPAA’s privacy and security standards directly applicable to “business associates”—independent contractors or agents of covered entities that receive or obtain protected health information in connection with providing a service on behalf of a covered entity.

HITECH also created four new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable to business associates and possibly other persons, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorneys’ fees and costs associated with pursuing federal civil actions;

applicable child-resistant packaging requirements under the U.S.

Poison Prevention Packaging Act;

The Lanham Act and federal antitrust laws;

state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws, which may apply to items or services reimbursed by any third-party payer, including commercial insurers, and state laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by federal laws, thus complicating compliance efforts.

Distribution of pharmaceutical products is subject to additional requirements and regulations, including extensive record-keeping, licensing, traceability, and storage and security requirements intended to prevent the unauthorized sale of pharmaceutical products.

The handling of any controlled substances must comply with the U.S.

Controlled Substances Act and the Controlled Substances Import and Export Act.

Third-Party Payer Coverage and Reimbursement

Significant uncertainty exists as to the coverage and reimbursement status of any of our drug candidates that ultimately may obtain regulatory approval.

In both the United States and foreign markets, our ability to commercialize our product candidates successfully, and to attract commercialization partners for our product candidates, depends in significant part on the availability of adequate financial coverage and reimbursement from third-party payers, including, in the United States, governmental payers such as the Medicare and Medicaid programs, managed care organizations, and private health insurers.

Medicare is a federally funded program managed by the CMS, through local fiscal intermediaries and carriers that administer coverage and reimbursement for certain healthcare items and services furnished to the elderly and disabled.

Medicaid is an insurance program for certain categories of patients whose income and assets fall below state defined levels and who are otherwise uninsured that is both federally and state funded and managed by each state.

The federal government sets general guidelines for Medicaid and each state creates specific regulations that govern its individual program.

Each payer has its own process and standards for determining whether it will cover and reimburse a procedure or particular product.

Private payers often rely on the lead of the governmental payers in rendering coverage and reimbursement determinations.

Therefore, achieving favorable CMS coverage and reimbursement is usually a significant gating issue for successful introduction of a new product.

The competitive position of some of our products will depend, in part, upon the extent of coverage and adequate reimbursement for such products and for the procedures in which such products are used.

Prices at which we or our customers seek reimbursement for our product candidates can be subject to challenge, reduction or denial by the government and other payers.

The United States Congress and state legislatures may, from time to time, propose and adopt initiatives aimed at cost containment, which could impact our ability to sell our product candidates profitably.

For example, under the Inflation Reduction Act, CMS is authorized to negotiate the prices that Medicare pays for certain drugs.

The first round of negotiations concluded in 2024 and CMS has released a list of drugs whose prices will be negotiated in 2025.

The cost of pharmaceuticals continues to generate substantial governmental and third-party payer interest.

We expect that the pharmaceutical industry will experience pricing pressures due to the trend toward managed healthcare, the increasing influence of managed care organizations and additional legislative proposals.

Our results of operations could be adversely affected by current and future healthcare reforms.

Patent Term Restoration and Marketing Exclusivity

Depending upon the timing, duration and specifics of FDA approval of our future product candidates, some of our U.S.

patents may be eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, commonly referred to as the Hatch-Waxman Amendments.

The Hatch-Waxman Amendments permit restoration of the patent term of up to five years as compensation for patent term lost during the FDA regulatory review process.

Patent-term restoration, however, cannot extend the remaining term of a patent beyond a total of 14 years from the product’s approval date and only those claims covering such approved drug product, a method for using it or a method for manufacturing it may be extended.

The patent-term restoration period is generally one-half the time between the effective date of an IND and the submission date of an NDA plus the time between the submission date of an NDA and the approval of that application, except that the review period is reduced by any time during which the applicant failed to exercise due diligence.

Only one patent applicable to an approved drug is eligible for the extension and the application for the extension must be submitted prior to the expiration of the patent.

The USPTO, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration.

In the future, we may apply for restoration of patent term for our currently owned or licensed patents to add patent life beyond its current expiration date, depending on the expected length of the clinical trials and other factors involved in the filing of the relevant NDA.

Marketing exclusivity provisions under the FD&C Act also can delay the submission or the approval of certain applications.

The FD&C Act provides a five-year period of non-patent marketing exclusivity within the United States to the first applicant to gain approval of an NDA for a new chemical entity.

A drug is a new chemical entity if the FDA has not previously approved any other new drug containing the same active moiety, which is the molecule or ion responsible for the action of the drug substance.

During the exclusivity period, the FDA may not accept for review an abbreviated new drug application, or ANDA, or a 505(b)(2) NDA submitted by another company for another version of such drug where the applicant does not own or have a legal right of reference to all the data required for approval.

However, an application may be submitted after four years if it contains a certification of patent invalidity or non-infringement.

The FD&C Act also provides three years of marketing exclusivity for an NDA, 505(b)(2) NDA or supplement to an existing NDA if new clinical investigations, other than bioavailability studies, that were conducted or sponsored by the applicant are deemed by the FDA to be essential to the approval of the application, for example, new indications, dosages or strengths of an existing drug.

This three-year exclusivity covers only the conditions of use associated with the new clinical investigations and does not prohibit the FDA from approving ANDAs for drugs containing the original active agent.

Five-year and three-year exclusivity will not delay the submission or approval of a full NDA.

However, an applicant submitting a full NDA would be required to conduct or obtain a right of reference to all of the preclinical studies and adequate and well-controlled clinical trials necessary to demonstrate safety and effectiveness.

Some third-party payers also require pre-approval of coverage for new or innovative devices or drug therapies before they reimburse healthcare providers that use such therapies.

While we cannot predict whether any proposed cost-containment measures will be adopted or otherwise implemented in the future, the announcement or adoption of these proposals could have a material adverse effect on our ability to obtain adequate prices for our product candidates and operate profitably.

In addition, in some foreign countries, the proposed pricing for a drug must be approved before it may be lawfully marketed.

The requirements governing drug pricing vary widely from country to country.

For example, the European Union provides options for its member states to restrict the range of medicinal products for which their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use.

A member state may approve a specific price for the medicinal product, or it may instead adopt a system of direct or indirect controls on the profitability of the company placing the medicinal product on the market.

There can be no assurance that any country that has price controls or reimbursement limitations for pharmaceutical products will allow favorable reimbursement and pricing arrangements for any of our products.

Historically, products launched in the European Union do not follow price structures of the United States and generally tend to be significantly lower.

Corporate and Other Information

We were formed in December 2014 as a Delaware limited liability company (“LLC”) under the name Dermata Therapeutics, LLC.

On March 24, 2021, we converted from an LLC to a Delaware C-corporation and changed our name to Dermata Therapeutics, Inc.

Human Capital Resources

As of the date of this report, we have eight full-time employees, with three employees working in the general and administrative department, two engaged in non-clinical and clinical development, two working in the chemistry, manufacturing, and controls department, and one employee working in the regulatory affairs and quality control department.

We believe that our future success will depend, in part, on our continued ability to attract, hire and retain qualified personnel.

In particular, we depend on the skills, experience and performance of our senior management and research personnel.

We compete for qualified personnel with other medical pharmaceutical and healthcare companies, as well as universities and non-profit research institutions.

We provide competitive compensation and benefits programs to help meet the needs of our employees.

In addition to salaries, these programs (which vary by country/region and employment classification) include incentive compensation plans, healthcare and insurance benefits, retirement investments, paid time off, and family leave, among others.

We also use targeted equity-based grants with vesting conditions to facilitate retention of personnel, particularly for our key employees.

The success of our business is fundamentally connected to the well-being of our people.

Accordingly, we are committed to the health and safety of our employees.

If Reka-Farm is unable to supply us with Spongilla raw material in accordance with a Forecast,

all available quantities of Spongilla then available to Reka-Farm shall be made available to us on a first priority basis until

all amounts of Spongilla set forth in the Forecast are supplied.

Pursuant to the Supply Agreement, we pay a pre-negotiated

price per kilogram for Spongilla supplied by Reka-Farm, and we are required to pay to Reka-Farm a royalty payment of less than

one percent of the Net Sales (as defined in the Supply Agreement) of any products we develop containing Spongilla raw material

supplied by Reka-Farm.

Supply Agreement may be terminated (i) by either party for material breach with 90 days written notice, if such material breach is not

cured within such notice period and (ii) by us for any reason or no reason upon 90 days written notice to Reka-Farm.

Supply Agreement includes customary terms relating to, among others, indemnification, intellectual property protection, confidentiality,

remedies, warranties, as well as certain quality requirements.

and Other Information

were formed in December 2014 as a Delaware limited liability company (“LLC”) under the name Dermata Therapeutics, LLC.

March 24, 2021, we converted from an LLC to a Delaware C-corporation and changed our name to Dermata Therapeutics, Inc.

Capital Resources

of the date of this report, we have nine full-time employees, with four employees working in the selling, general and administrative

department, two engaged in non-clinical and clinical development, two working in the chemistry, manufacturing, and controls department,

and one employee working in the regulatory affairs and quality control department.

believe that our future success will depend, in part, on our continued ability to attract, hire and retain qualified personnel.

In particular,

we depend on the skills, experience and performance of our senior management and research personnel.

We compete for qualified personnel

with other medical pharmaceutical and healthcare companies, as well as universities and non-profit research institutions.

We provide competitive compensation and benefits programs to help meet

the needs of our employees.

In addition to salaries, these programs (which vary by employment classification) include incentive compensation

plans, healthcare and insurance benefits, retirement investments, paid time off, and family leave, among others.

We also use targeted

equity-based grants with vesting conditions to facilitate retention of personnel, particularly for our key employees.

success of our business is fundamentally connected to the well-being of our people.

Accordingly, we are committed to the health and safety

of our employees.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business